The Tokyo stock market on Thursday saw the Nikkei Stock Average fall sharply by 931 yen to 67,470 yen, down from the previous session. Following declines across all three major U.S. benchmarks, including the Dow Jones Industrial Average on Wednesday, the downturn triggered short-term profit-taking. The primary catalyst was a sharp drop in semiconductor and software design firm Broadcom during after-hours trading following its earnings announcement. SoftBank Group Corp. <9984>, which had been aggressively driving up the Nikkei, fell more than expected, adding downward pressure to the index. However, the fact that the Nikkei closed in the 67,000 yen range?a level it cleared the previous day?suggests the index is entering a healthy consolidation phase.

The scenario for opening the Strait of Hormuz remains gridlocked, with crude oil markets showing signs of ticking upward, leaving risk-averse sentiment firmly in place. While U.S. President Donald Trump remains eager to end the conflict with Iran, the positions of both sides are completely irreconcilable with no resolution in sight. Amid deteriorating relations with Israeli Prime Minister Benjamin Netanyahu and no viable "TACO" option available, the market appears to have resigned itself to "NACHO" (Not a Chance Hormuz Opens)?the reality that the Strait of Hormuz will remain closed.

While U.S. stock markets declined on Wednesday, the Dow had hit record highs for five consecutive sessions prior, and the Nasdaq Composite's drop marked its first in 10 sessions. The underlying resilience of the Tokyo market remains intact, and both Japanese and U.S. equities do not appear to be gripped by fear over the Iran situation while remaining attentive to the news flow. However, there is a clear caveat: only AI and semiconductor-related stocks appear unconcerned with the geopolitical friction. The current AI-driven market is a textbook case of single-minded determination, ignoring the external macro environment with eyes fixed solely ahead. Conversely, investment funds are actively avoiding most other sectors linked to daily economic activities. This is vividly illustrated by the fact that stocks hitting new lows daily far outnumber those touching new highs. As long as the "NACHO" sentiment holds sway, a broader value rotation cannot occur. Any valuation-driven mean reversion out of the AI-semiconductor monopoly will likely coincide with a "Hormuz Opened" scenario?when the strait is finally liberated.

Earlier this week on Monday, SoftBank Group's market capitalization surpassing TOYOTA MOTOR CORPORATION <7203> became a major talking point. TOYOTA MOTOR's stock price has been extremely weak since mid-April, while SoftBank Group's shares broke sharply upward over the same timeframe. While the market cap reversal seemed inevitable, it remains highly sensational. Calling this a fleeting anomaly of an AI bubble may invite objections, but looking at operational scale, TOYOTA MOTOR generates roughly 50 trillion yen in sales versus SoftBank Group's 7.8 trillion yen. Granted, there is a vast structural difference in profit margins?the distinction between a manufacturer and an investment firm?but while SoftBank Group has secured its status as an AI-focused giant, it functions essentially as a giant speculator riding the AI wave. Unlike TOYOTA MOTOR's layered business model of generating profits from hardware, SoftBank Group capitalizes on the gaps between market trends and valuations to conduct arbitrage. No matter how skilled the speculator, profits evaporate when AI-related names enter a downturn, a reality clearly reflected in market capitalizations.

On Thursday, amid a sharp broader market decline, funds rotated back into semiconductor manufacturing equipment makers, including Tokyo Electron Limited <8035> and DISCO CORPORATION <6146>. Even as the volume of investment capital grows massive, the AI-semiconductor ecosystem remains vast. Like shifting waves, the focus of cyclical stock picking naturally rotates toward clusters sharing the same near-future vector. For now, a blue-chip strategy should treat downward wave turns as buying opportunities on dips. For small and mid-cap names in the semiconductor periphery, investors should target "pickaxe stocks" and build positions as additional buying catalysts emerge.

KOATSU GAS KOGYO CO., LTD. <4097>, the largest producer of dissolved acetylene and a supplier of various industrial gases, is gaining recognition for its potential to attract sudden speculative interest. The key catalyst is helium, essential for semiconductor manufacturing, which faces a severe global shortage. Amid mounting pricing pressure, KOATSU GAS KOGYO is establishing a strong presence in semiconductor helium recovery and recycling, alongside NIPPON SANSO HOLDINGS CORPORATION <4091>, the nation's largest industrial gas supplier. Although the stock price has recently lingered in a weak range, subtle shifts in momentum have emerged lately. Additionally, NIRECO CORPORATION <6863>, which develops and manufactures industrial control devices and inspection equipment, is successfully capturing high-level demand in its optics business?including laser devices and optical components for semiconductor manufacturing equipment?by leveraging its advanced technological capabilities.

Friday's schedule includes the April household survey, April preliminary monthly labor statistics, and May first-half trade statistics, all due before the morning open. A three-month Treasury bill auction will also take place during the morning session. In the afternoon, the April preliminary economic trend index and consumption activity index will be released. Overseas, the Reserve Bank of India will announce its policy rate decision, and the eurozone's final first-quarter real GDP figures will be released. Market attention also remains high ahead of the U.S. nonfarm payrolls report for May. The U.S. consumer credit balance for April is also scheduled for release on Friday.

Source: MINKABU PRESS

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