The Tokyo stock market on the 7th, the first trading day after the Golden Week holidays, saw the Nikkei Stock Average surge 3,320 yen from the previous trading day to 62,833 yen, marking a record-high daily gain and significantly updating its all-time high. Since the overall stock price surpassed the 50,000 yen level, daily moves exceeding 1,000 yen have become unremarkable, but still, the nearly 11 trillion yen in trading value and an intraday range exceeding 3,500 yen at one point feels almost surreal. Relentless buying continues to focus on major AI and semiconductor-related stocks. When viewing the current overall market movements in fragments, including trading volume levels, it is clear that the market exhibits characteristics of an AI bubble. However, market participants also sense intuitively that this is not a market where short selling pays off. Like a log kicked down into a deep ravine, the speed of rotation only accelerates, bouncing off everything that tries to cling to it. This has become an otherworldly space where not only short sellers but even buyers cannot easily participate.

Today is the Special Quotation (SQ) calculation day for options, and speculative buying may have accelerated the short squeeze. Meanwhile, large-scale buying believed to be from overseas investors was observed. "Overseas speculators are notably trend-following momentum players, often called 'momentum chimpanzees.' Honestly, many individual investors may have no choice but to watch from the sidelines," said a market analyst at a mid-tier securities firm. The semiconductor-related stocks currently driving the market are dominated by high-priced stocks, including ADVANTEST CORPORATION <6857>, which has the largest weighting in the Nikkei Average, and Tokyo Electron Limited <8035>, which ranks third. For individual investors, even minimum trading units are not easily affordable in monetary terms.

Moreover, investors who have emerged from the long deflationary tunnel know the terror of when the gears reverse. The upward performance being displayed before their eyes is not guaranteed for tomorrow. However, while humans would feel the fear of reversal, AI programmed to buy now mechanically charges forward. There is no fear or emotion, no room for hesitation. Meanwhile, those who shorted (expecting a decline) with human sensibilities see their expectations turn directly into fear, triggering panic-like short squeezes.

The current global popularity of AI and semiconductor stocks is clearly not a localized phenomenon in the Tokyo market. Today, the Nikkei Average staged a historic rally, but looking at the rate of increase over approximately one month from April to the present, the Korean KOSPI surged from 5,000 to 7,500, an astonishing 50% increase, representing performance incomparable to the Nikkei Average. So what happened during this one month? While attention tends to focus solely on the Iran situation, the goal there is the end of combat between the US/Israel and Iran. That represents the maximum value as positive news, with no room for further growth. Needless to say, there are no factors to justify a 1.5-fold increase in KOSPI's market capitalization, which is why it can only be described as a bubble. However, with the relentlessness of AI trading, all accumulated short positions are swept away.

In today's Tokyo market, the Nikkei Average suddenly stepped on the accelerator, chasing after the Korean market soaring ahead into the stratosphere. The biggest topic was the fact that Kioxia Holdings <285A>, which had consistently handled over 1 trillion yen in daily trading value during the April market, remained at its daily limit bid throughout the session without any trades being executed. Regardless of whether the Philadelphia Semiconductor Index (SOX Index) soars to record highs or how much buying Samsung Electronics attracts in Korea, there has been no fundamental improvement for Kioxia. Despite no major individual catalysts emerging, a stock with by far the highest trading liquidity in the Tokyo market failed to open. This very phenomenon is a bubble called "risk of not holding."

While there is currently an atmosphere that only AI and semiconductor-related stocks or their peripherals matter, it does not mean that only large-cap stocks on the Prime Market matter. Many small- and mid-cap semiconductor-related stocks are surging, and this trend appears likely to continue after the earnings season passes. Among stocks that this column has continuously watched, AKIBA Holdings Co., Ltd. <6840> and MINATO HOLDINGS INC. <6862> hit their daily limit up, while KITAGAWA SEIKI CO.,LTD. <6327> also extended gains to the daily limit at one point. JAPAN ELECTRONIC MATERIALS CORPORATION <6855> and inspec Inc. <6656> also rebounded with limit-up moves. In addition, stocks such as TOWA CORPORATION <6315> and Nomura Micro Science Co.,Ltd. <6254> delivered high performance. It is also necessary to calmly assess the flow into small- and mid-cap stocks.

Tomorrow is the calculation day for the Special Quotation (Option SQ) for May stock index options. Other scheduled releases include the March Monthly Labor Survey and the May Bank of Japan current account balance projection, both before the morning session begins, while a 3-month Treasury bill auction will be held during the morning session. Major domestic corporate earnings releases are scheduled from SONY GROUP CORPORATION <6758>, IHI Corporation <7013>, TOYOTA MOTOR CORPORATION <7203>, Nintendo Co., Ltd. <7974>, NTT, Inc. <9432>, JAPAN TOBACCO INC. <2914>, and KONAMI GROUP CORPORATION <9766>. Overseas, market attention is focused on the April US employment statistics. In addition, focus will be on March US business inventories and sales, and the May University of Michigan Consumer Sentiment Index (preliminary).

Source: MINKABU PRESS

*Translated by generative AI. Click here for the original article.