Nikkei average hits record 66,329 led by AI and chips

2026-05-29

Japanese stocks are gaining speed. The Nikkei Stock Average closed on the 29th at 66,329, up 1,636 yen from the previous day, renewing its record high. It was the first time the index had ended above 66,000, and its rise from the end of 2025 has topped 30%.

Funds flow into AI and chip shares

Expectations grew that fighting between the United States and Iran would come to an end, sending money into the stock market. Semiconductor-related and electronic parts shares were widely bought on expectations for expanding demand for artificial intelligence, lifting the index. At one point, the gain from the previous day topped 1,800 yen, and trading value on the Tokyo Stock Exchange Prime Market surged to 16.3127 trillion yen from 10 trillion yen the day before. Even including the period when it was the former First Section of the Tokyo Stock Exchange, this was by a wide margin the biggest on record.

The Nikkei average has risen by 15,990 yen, or 31.8%, so far in 2026. As of the 29th Japan time, that is well above the 10.5% gain in the U.S. S&P 500 and the 5.6% rise in Europe's Stoxx 600 from the end of 2025, pulling away from major global indexes.

Earnings hopes lead the stock rally

At the center of the rally is expectations for earnings growth at AI and semiconductor-related companies. Nomura Securities compiled earnings forecasts for 24 related names including SBG, Kioxia Holdings, Ibiden and Fanuc, and found that operating profit in fiscal 2026 is seen totaling 13.5 trillion yen, up 15% from the previous year. For companies that use international accounting standards, the figures are based on pre-tax profit.

Excluding the volatile SBG, operating profit in fiscal 2026 is expected to double from 5.6 trillion yen in the previous year to 11.7 trillion yen, it said. The share of total operating profit among TOPIX constituent stocks would rise to above 12%. On the 26th, Nomura Securities lifted its year-end 2026 forecast for the Nikkei average from 63,000 yen to 68,000 yen. It had also raised its outlook on the 11th.

On the other hand, signs of overheating are starting to be noted. According to Goldman Sachs in the U.S., hedge funds and other clients of the firm recorded their largest net buying pace of Japanese stocks in the past two and a half months, and their investment ratio in Japanese stocks reached the highest level since 2016.

Of about 1,500 stocks listed on the Tokyo Stock Exchange Prime Market, 761, or roughly half, were still in negative territory for the year as of the 29th. For the stock rally to continue, buying may need to spread beyond AI and semiconductor-related shares.

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