Japan's Nikkei stumbles as Nvidia earnings results loom

"The whole world is awaiting the result of Nvidia. The outcome will affect , particularly the U.S. equities, which will affect Japanese stocks," said Shuji Hosoi, senior strategist at .

Nvidia, 's third-largest firm by market capitalization, will report results after the closing bell on Wednesday in what is likely to be a significant market catalyst and will test whether the outsized rally in can be sustained.

Heavyweight chip stocks, which helped the Nikkei scale a record intraday high of 41,087.75 on March 22, sagged ahead of the earnings.

declined 1.2% and , which counts Nvidia among its customers, fell 0.8%.

The Nikkei has been hovering below 40,000 since the beginning of April, partly because local companies' modest earnings forecasts have weighed on sentiment, strategists said.

"Today's declines were bigger than expected. Investors, particularly foreigners, might be selling Japanese stocks to buy overseas stocks whose outlook is stronger," Hosoi said.

Markets are also bracing for further by the Bank of Japan this year. Bond yields have risen this month on hawkish hints from the central bank as it seeks to contain the yen's depreciation.

Of the Nikkei's 225 constituents, 176 fell, with index heavyweight being the biggest drag on the index with a 1.9% decline.

Among other stocks, Shin-Etsu Chemical, which manufactures chip silicon products among other things, stumbled 2.3%. Toyota Motor fell 1.4%.

On the other hand, rose 2.4% to become the biggest support for the Nikkei.

Kusuri No Aoki Holdings rose 1.6% after Hong Kong-based activist fund Oasis Management raised its stake in the drug store chain.