Nikkei's record rally shifts gears as investors chase next AI darlings

Panasonic Holdings

Today 02:54

By Junko Fujita

    TOKYO, June 26 (Reuters) - Japan's record-breaking Nikkei rally is no longer about AI — it's about who's left to buy.
While AI euphoria is lifting shares around the world, the 37% gain in Japan's benchmark Nikkei index has far outpaced major indexes in the United States, Europe and China.
The first AI wave in Japan was driven by now-familiar names like SoftBank Group 9984.T, Advantest 6857.T and Tokyo Electron 8035.T. A second leg brought in suppliers including fibre-optic cable makers Fujikura 5803.T and Furukawa Electric 5801.T. Now a third wave is spreading in the components and power infrastructure that data centres cannot run without.
Murata Manufacturing 6981.T and Taiyo Yuden 6976.T, leading makers of multi-layer ceramic capacitors (MLCCs) used to regulate power in AI servers, have emerged as the latest engines of the index's advance.
Shares of Murata have risen 268% so far this year. Taiyo Yuden has surged 438%, trailing only memory maker Kioxia 285A.T, which overtook Toyota Motor 7203.T this month to become Japan's most valuable company, in gains on the Nikkei.
"This is just the beginning of their rally. Investors will continue to hunt stocks that are related to AI data centres," said Kazuaki Shimada, chief strategist at IwaiCosmo Securities.
Ibiden 4062.T, a supplier to AI bellwether Nvidia NVDA.O, is another high-flyer, up 292%. The latest joiner is Panasonic Holdings 6752.T, whose shares hit a record high this month after the company announced a plan to mass produce battery cells for data centres at its factory in the U.S. state of Kansas.
Chip-related names such as Tokyo Electron, Advantest and Kioxia account for about 25% of the Nikkei's value, according to Takamasa Ikeda, senior portfolio manager at GCI Asset Management. Together with companies like Murata, Sony Group 6758.T and Kyocera 6971.T, that weighting goes up to 35%.
That concentration carries risk. The Philadelphia semiconductor index .SOX, a benchmark for U.S. tech shares, traded at more than 70% above its 200-day average as of last week, a sign of overheating.
"It might be hard for the SOX index to maintain its current momentum in the mid-to-long term," Ikeda said. "And if there's a correction in the SOX, the same fate will be inevitable for the Nikkei."

 (Reporting by Junko Fujita; Editing by Rocky Swift and Christopher Cushing)
 ((junko.fujita@thomsonreuters.com;))