Japan's Nikkei index surged 4% to close at 64,362.02 on Friday, driven by a wave of global artificial intelligence optimism following better-than-expected Microsoft earnings.

The rally was broadly led by technology and semiconductor-related stocks. Advantest, a major Japanese semiconductor testing equipment manufacturer, jumped 16%. SoftBank Group, the technology investment conglomerate, soared 14%. Panasonic posted the largest individual gain among notable movers, surging 19.5% after the company raised its profit outlook.

Japanese automakers underperformed the broader market, however, as a stronger yen weighed on export-oriented earnings. Currency appreciation reduces the value of overseas revenue repatriated into yen, typically pressuring the profitability of Japan's major car manufacturers and other export-driven sectors. The yen's recent strength followed intervention by Japan's central bank.

Microsoft Earnings Fuel Global AI Sentiment

Microsoft's earnings results served as the primary catalyst for the session's risk-on tone. As one of the world's largest companies by market capitalization and a central player in AI infrastructure through its partnership with OpenAI, Microsoft's financial performance is closely watched by investors worldwide for signals about the trajectory of AI-related spending and enterprise demand.

Strong results from Microsoft reinforced investor confidence in the broader AI supply chain, benefiting companies across the semiconductor, testing, and technology investment segments. Advantest, as a key supplier of test equipment used in chip manufacturing, and SoftBank Group, which holds significant technology investments including a substantial stake in chip designer Arm Holdings, were among the most prominent beneficiaries in Tokyo trading.

The cross-border ripple underscores how deeply integrated Asian semiconductor and technology firms have become in the global AI buildout, with earnings from a single US hyperscaler capable of moving major indices across the Asia-Pacific region.

Yen Strength Pressures Exporters

While AI-exposed stocks led the market higher, Japan's automakers and other export-sensitive names lagged behind. The Bank of Japan's intervention to support the yen contributed to currency appreciation during the period. A stronger yen presents a headwind for Japanese exporters, as it erodes the yen-denominated value of foreign sales and can make Japanese products less price-competitive in international markets.

The yen's strength, however, did not derail the broader rally, highlighting the dominance of the AI-driven narrative over currency concerns for the session's trading.

Source: Economic Times Markets