Nomura: AI chip rebound may outlast forecasts after 4.1% Nikkei drop

Nomura Securities strategists note that AI and semiconductor stocks were the weak spot in Japan's July–September quarter, with the Nikkei falling 4.1% while the bank-heavy TOPIX rose 3.8%. The strategists describe the period as one where selling in AI and chip names climaxed around July 29, followed by a rebound that has run since, though few investors they speak with see it as a full-fledged rally. They also point out that portfolios have shifted toward banks and service stocks and away from AI and semiconductor names.

The strategists argue that the leverage that inflated at June's highs is unlikely to return, and that AI and semiconductor price-to-earnings ratios are likely to stay lower than before. Still, they say that after P/E ratios fall, growth in earnings per share tends to drive share prices higher. They highlight that relatively cheap Japanese semiconductor stocks have held up since September 25, and that the SOX index rose 9.5% in September even after a September 29 meeting between President Trump and AI companies ended with only self-regulation and monitoring confirmed.

Nomura also points to inventory data as a key signal, saying investors may not be too late if they wait for confirmation that Japanese industrial inventories are falling. It notes that after August industrial production fell 1.7% month-on-month, industrial inventories dropped 1.9% year-on-year, with electronics parts and devices inventories down 5.8% year-on-year for a second straight month. The September BOJ Tankan showed large manufacturers' business conditions improving and their fiscal 2026 ordinary profit forecasts up 13.6% year-on-year for manufacturers. Whether the rebound can extend likely depends on whether these inventory and earnings trends continue.