Tokyo stocks surged on April 16, with the Nikkei 225 soaring 1,384 points from the previous session to close at 59,518, easily surpassing the previous record high of 58,850 set on Feb. 27. While expectations for an end to the U.S.-Iran conflict drove the rally, the scale of the advance appeared to defy simple logic. Even if the Middle East situation stabilizes, corporate earnings will likely bear lasting scars, complicating guidance for the current fiscal year. However, the rally has been led by AI and semiconductor sectors, amplified by speculation over military AI applications. While conventional wisdom focused on the "Strait of Hormuz blockade," the market looked toward a different horizon. With this momentum, the 60,000 yen level now seems within reach. The market has once again demonstrated that reality outperforms prediction, regardless of analytical depth.

Tailwinds continue to strengthen. Foreign investors' trading data for the second week of April (April 6-10), released by the Tokyo Stock Exchange, showed net purchases of 1,641.8 billion yen, bringing the two-week total to over 3.5 trillion yen. The historical trend of foreign buying in April appears to be holding firm. Additionally, Taiwan Semiconductor Manufacturing Co (TSMC) released earnings that exceeded high market expectations, suggesting the market had already priced in these developments. The Philadelphia Semiconductor Index (SOX), which has been spiraling toward record highs, is expected to provide significant lift to Tokyo-listed chip stocks.

The current market favors blue-chip issues, particularly AI and semiconductor-related stocks with high Nikkei 225 weightings, amplifying their impact on the index. While the Nikkei 225 surged to a new record, TOPIX remained relatively subdued, indicating a futures-led rally. Nevertheless, the established uptrend appears robust. While the Nikkei's price-to-earnings (P/E) ratio suggests historically irregular buying, this April market has proven that shorting even a potential bubble can be dangerous in its early stages. Markets climb a wall of worry; the very skepticism surrounding a "major correction" is currently fueling the rally.

News that TOTO Ltd <5332> suspended unit bath orders due to naphtha shortages related to the Middle East crisis concerned participants early in the week, raising fears about housing and materials sectors. However, TOTO shares quickly regained balance after initial wavering, symbolizing market depth. With fundamental strength confirmed, capital is rotating beyond the "Hormuz curse" toward semiconductors and related strategic materials. AI data centers, comprised of semiconductors and optical devices, have emerged as a dominant theme.

Like wildfire, "Physical AI"?the integration of AI with robotics?emerged as an underlying theme today. NVIDIA Corp previously announced a partnership with Cadence Design Systems Inc to develop AI for robotics, striking a chord with hungry investment capital. AI continues to accelerate, possessing computational and reasoning capabilities far beyond human capacity. Physical AI, positioned by NVIDIA CEO Jensen Huang as the next phase of the AI revolution, breaks the two-dimensional paradigm. By evolving into entities that act autonomously in three-dimensional space, AI will inevitably transform daily life.

Today, Harmonic Drive Systems rose as much as 465 yen to 4,815 yen. Industry veteran Fanuc Corp <6954> traded firmly, while Nabtesco Corp <6268> sought higher levels. Among small and mid-cap stocks, Kikuchi Seisakusho Co Ltd <3444> remained locked at its daily limit up, and Hirata Corp <6258> showed strong movement. Hephaist Co Ltd <6433> surged over 10%. A stock to watch is Techno Horizon Co Ltd <6629>, which specializes in factory automation robotics and AI-driven X-ray inspection. The company occupies a key position in AI-robotics fusion through its optical and sensing technologies.

Tomorrow's schedule shows no major domestic events, though a three-month Treasury discount bill auction will be held in the morning. Overseas, Malaysia will release preliminary first-quarter GDP data. A foreign ministers' meeting of the Commonwealth of Independent States (CIS) is scheduled in Kaliningrad, Russia. Other releases include Eurozone current account and trade balance data for February.

Source: MINKABU PRESS

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