Due to the artificial intelligence (AI) boomJapan’s largest technology stock fund, which took advantage of the sharp rise in SoftBank Group stocks, predicts that the AI market will enter its second stage.
Major U.S. semiconductor company for AINvidia‘s market capitalization is the first in the world to reach $5 trillion (approximately 760 trillion yen)Investing in tech stocks is becoming increasingly popular in domestic and international stock markets. On the other hand, concerns are beginning to emerge about market concentration and overheating, with seven large tech companies accounting for more than one-third of the weight of the US S&P 500 stock index, and how well one reads AI stocks could affect future investment results.
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Mr. Fukuda of Nomura AM
Source: Nomura Asset Management Co.
Nomura Asset Management’s Japanese stock investment trustYasuyuki Fukuda, chief portfolio manager of the Information Electronics Fund, said in an interview with Bloomberg that although he is wary of the movements of some AI stocks, he recognizes that the AI market itself has “just begun its second act.”
Mr. Fukuda, who was an analyst for European and American tech stocks during the IT bubble in 2000, analyzes the current AI market as “not at a bubble stage.” At the time, communications traffic was increasing dramatically with the spread of personal computers and mobile phones, but the problem was that companies with poor free cash flow were making new investments in communications networks, leading to bubble-like financing.
However, this time, so-called hyperscalers with large-scale capabilities and capacities in cloud computing are leading the AI investment boom, and we see this as “generally sound corporate investment activity.”
Mr. Fukuda points out that the first act of growth will be investment in data centers as AI becomes more widespread, and the second act will be the increased burden on telecommunications service providers’ large-scale networks, which will “stimulate investment.” There is a high possibility that Japanese electronic parts and semiconductor-related manufacturers will also benefit, and in the second stage, they will have an advantage in telecommunications carriers.We are paying attention to Furukawa Electric.
The Information Electronics Fund, which has been operating for more than 40 years since 1984, invests in domestic electrical equipment, precision equipment, information software services, and telecommunications-related companies, and its performance since April 2011, when Mr. Fukuda became manager, has exceeded the U.S. Nasdaq Composite Index. The amount of assets under management was 7.2 billion yen when he took office, which has increased more than 10 times to 83.3 billion yen as of the end of October this year, making it the largest electronics investment trust in Japan.
The fund’s 25-year total return was +49% as of November 6, the highest rate of increase among nine similar funds with total assets under management of 10 billion yen or more. This exceeds 22% of the Tokyo Stock Price Index (TOPIX, including dividends) and 30% of the TOPIX Electrical Equipment Index during the same period. As of the end of September, the top stocks included were SoftBank G andFujikura, Furukawa Electric,sony group,Tokyo Electron etc.
As for SoftBank G, the holding ratio increased significantly in May 2014, and the stock price, which was below 10,000 yen, hit a new high of 27,000 yen in October of this year. Our subsidiary is a semiconductor design specialist.We evaluate Arm Holdings’ growth potential and investment stance in the AI revolution, and we are evaluating Arm Holdings’ growth potential and investment stance in the AI revolution.Stargate, a huge AI development project being advanced with OpenAI and others, may be included in the Japanese government’s approximately 80 trillion yen investment support for the United States.
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However, AI-related stocks have recently begun to show instability, with SoftBank G stock approaching the 28,000 yen price target of Mizuho Securities, which has the highest price target among major analysts, and then dropping sharply.
Chisa Kobayashi, a Japanese stock strategist at UBS SuMi TRUST Wealth Management, said that while she is not worried about the long-term, given the sharp rise in AI stocks in October due to the addition of investments in OpenAI, she also expressed the view that “With all the strong financial results of major US tech companies, it would not be surprising to see profits booked.”
Mr. Fukuda also said that while it would be fine if the market as a whole were to rise, there is a vulnerability in a rise driven by only a few stocks, such as the U.S. S&P 500. “I am wary that the quality of the Japanese market has not been good in recent months as well.”
