A Nomura Securities strategist explains that the rebound in AI and semiconductor stocks is being supported by declining inventories and upward revisions to earnings forecasts, and could continue longer than expected.
From July to September, the TOPIX rose 3.8%, while the Nikkei Stock Average fell 4.1%. After the ex-dividend adjustment, the Nikkei recovered faster than the TOPIX, also suggesting investors' willingness to buy on dips. AI and semiconductor stocks have remained relatively firm since then, while investors' portfolios have shifted toward banks and services stocks.
AI and semiconductor stocks rebounded from their lows from 29 July, with the market having reversed course 4 times so far in 2026. Few observers currently describe this as a full-fledged bull market, although some believe the market's recovery will continue.
Data since September suggests that the TOPIX and Nikkei tend to remain firm when the US ISM Manufacturing Index exceeds 55, and inventory data is also attracting attention. Japan's August industrial production fell 1.7% month on month, while inventories declined 0.5% month on month and 1.9% year on year.
In the same month, inventories of electronic components and devices fell 3.3% month on month and 5.8% year on year, indicating that inventory restraint continued. The Tankan survey showed upward revisions to large companies' earnings forecasts for fiscal 2026, with manufacturing ordinary profit expected to increase sharply. Large companies' sales are projected to rise 5.7% year on year and ordinary profit 4.3%, while manufacturing profit is expected to increase by particularly strong 13.6%.