TOKYO - Rising interest rates are emerging as a major threat to the AI-driven stock market rally, with growing concern centered on the financial health of AI-related companies that have increasingly relied on private credit markets to fund rapid expansion.
U.S. stock markets came under pressure on May 15th as rising crude oil prices and climbing interest rates weighed heavily on investor sentiment, with technology and semiconductor shares leading the decline.
Particular attention was focused on the sharp rise in interest rates across Japan, Europe, and the United States. The yield on the U.S. 10-year Treasury temporarily climbed into the 4.6% range, reaching its highest level in about a year.
Market expectations for U.S. monetary policy also reflected persistent inflation concerns. Futures markets are now pricing in almost no possibility of an interest rate cut by December, while the probability of additional rate hikes has risen to roughly 50%.
Kevin Warsh is expected to assume the chairmanship of the Federal Reserve Board next week, and market participants increasingly believe that tackling inflation will become a top priority for the Fed.
Growing expectations of higher interest rates pushed technology shares lower. Major semiconductor-related companies including NVIDIA, Intel, and Micron Technology all posted sharp declines. Shares of recently listed AI semiconductor company Cerebras Systems also plunged. Apart from MicroStrategy, which gained after hedge fund investment activity was disclosed, major high-tech shares broadly declined.
With the Nasdaq and S&P 500 having repeatedly reached record highs in recent weeks, analysts said rising yields likely triggered profit-taking among investors.
Appearing on the program, Osaka University of Economics professor Yoshizaki noted that the United States has begun refunding tariffs collected under former President Donald Trump’s trade measures, totaling approximately $166 billion. He said the repayments, which include interest, are likely contributing to higher borrowing costs.
Yoshizaki said private credit had effectively become a “convenient wallet” supporting AI investment, though he added that he does not currently believe the issue poses a systemic threat to the broader financial system.
Economic data released on May 15th showed the New York Fed’s manufacturing business index rose 8.6 points from the previous month to 19.6, exceeding market forecasts and reaching its highest level in four years. New orders and inventories improved, while prices paid surged 11.6 points amid continued inflationary pressures. Employment, however, declined slightly.
Meanwhile, Reuters reported that Elon Musk-led space company SpaceX could launch its IPO on the Nasdaq market as early as June 12th. The company is reportedly preparing to unveil listing plans on May 20th. SpaceX is aiming for what could become the largest IPO in history, seeking to raise $75 billion at a valuation of $1.05 trillion, or roughly 276 trillion yen.
Alphabet, the parent company of Google, also announced terms for its yen-denominated bond issuance on May 15th. According to the Nikkei, the issuance totals 576.5 billion yen across maturities ranging from three to 40 years, surpassing Berkshire Hathaway as the largest yen-denominated bond sale ever by an overseas company. It marks Alphabet’s first yen bond issuance.
Attention is now shifting to the semiconductor sector, particularly memory-chip maker Kioxia Holdings, whose latest earnings significantly exceeded expectations.
Kioxia reported revenue for the fiscal year ending March rose 37% from a year earlier to 2.0376 trillion yen, while net profit nearly doubled to 554 billion yen, both record highs. Analysts attributed the strong results largely to sharp increases in memory prices, with some products selling for more than double previous levels.
The company forecast quarterly profit of 869 billion yen for the April-to-June period, approximately 48 times higher than a year earlier.
Analysts said demand for AI-related memory products continues to tighten supply conditions. While high-bandwidth memory (HBM) used in AI training has driven growth so far, expanding use of AI inference is now boosting demand for additional memory and flash storage products as well.
Experts expect demand to continue outpacing supply through 2026, supporting elevated prices across the memory market.
Investor attention is also focused on upcoming earnings from NVIDIA, scheduled for release on May 20th. Analysts said the key point will be whether the company continues to demonstrate strong AI-related demand.
Other major earnings announcements this week included SoftBank Group, which reported annual net profit exceeding 5 trillion yen, roughly 4.3 times higher than the previous year and the highest annual profit ever recorded by a Japanese company.
Analysts said SoftBank has benefited significantly from the ongoing AI investment boom, particularly through its exposure to OpenAI.
Competition in the AI sector is also intensifying with the rise of Anthropic, though experts believe the AI market itself will continue expanding rapidly enough to support multiple major players in the near term.
Source: テレ東BIZ
