AI and semiconductor stocks are showing fewer signs of overheating, while the Nikkei Stock Average is undergoing a correction. Attention is focused on whether the market will recover after the summer lull and return to a year-end rally from autumn onward.
The Nikkei Stock Average fell to ¥64,362 at the end of July, compared with a closing level of ¥72,366 on 25 June. The main factor cited is the unwinding of the sharp rally in AI- and semiconductor-related stocks. Sharp swings in crude oil prices, expectations of US interest-rate hikes and concerns over monetizing AI investment have added to selling pressure, while there has been no major change in the earnings growth or long-term outlook for AI-related businesses, leading some to expect a recovery once the correction runs its course.
By sector, the electrical equipment sector in the Tokyo Stock Price Index recorded a record-high gain of 52.6% in April-June before falling 9.4% in July, suggesting that further adjustment may be needed for investor sentiment to recover. As of July, the Nikkei Stock Average had fallen below the ¥60,000 range, while P/E ratios for semiconductor-related stocks had also declined sharply.
Global semiconductor stocks are said to be trending toward a recovery from autumn, and data from the past 20 years shows that Japanese and US stocks have tended to recover again in October-December after the summer lull. Stocks in sectors with many AI and semiconductor names, including electrical equipment, nonferrous metals, machinery, precision instruments and chemicals, are seen as frequently staging another recovery in October-December.
Despite the impact of the summer lull, this is a period in which investors are assessing the potential revival of AI- and semiconductor-related stocks ahead of a year-end rally. Changes in earnings-growth outlooks across the various markets are a major focus.