Nikkei Extends Rise, Eases on Korea Weakness; AI and Chip Stocks Bought

2026-07-01

Nikkei Extends Gains, but Upside Is Capped

Japan's Nikkei share average extended gains in Tokyo trade on the 1st, ending at 70,474.96, up 412.64 points from the previous day. Expectations for artificial intelligence and chip stocks remain strong, but many investors are wary of sharp price swings, and the index pared gains after a firm start.

Korean Stock Weakness Weighs

The Nikkei at one point rose as much as 1,900 points from the previous day after the open. However, it quickly lost momentum toward the close of morning trading and was pushed back in the afternoon near the key 71,000 level. The drag came from losses in Korean stocks, with the Korea Composite Stock Price Index (KOSPI) reversing from early gains and at one point falling by nearly 4%.

Sentiment was hurt by Samsung Electronics falling as much as 7% and SK Hynix dropping 6% at one point. Samsung Electronics and SK Hynix account for a large share of South Korea's market capitalization, and Kazuaki Shimada, chief strategist at IwaiCosmo Securities, said that 'the center of the world is now the Korean stock market.' In the Nikkei as well, Fujikura turned from gains in the morning to a 7% loss, while Kioxia Holdings fell 2%.

Buying in Chip Stocks Continues

On the other hand, many investors who had missed the rapid rally remained active, and buying in AI- and chip-related shares continued. Semiconductor equipment maker KOKUSAI ELECTRIC rose 5%, while TOWA gained 6%, posting another strong advance. The massive investment for semiconductor plant construction announced by Samsung Electronics and SK Hynix on June 29 also continued to support buying.

Shimada said that 'huge investment can raise supply-demand concerns for memory makers, but semiconductor equipment tends to benefit more easily.' Mamoru Iwahara, chief of the market investment department at Japan Post Insurance, also said that, following the South Korean giants' capital spending plans, 'while excessive investment by hyperscalers had been a concern, the investment plans confirmed the strength of demand.'

Caution Builds Ahead of Events

That said, some investors remain cautious about how long buying can last. With a series of major economic indicators due soon, including U.S. payrolls data on the 2nd, Kohei Onishi, senior investment strategy researcher at Mitsubishi UFJ Morgan Stanley Securities, said that 'if the Federal Reserve's hawkish stance comes back into focus, there is a possibility that investors will reduce positions.'

On the supply-demand side, selling of exchange-traded funds (ETFs) that reach their record date in early July also lies ahead. ETFs need to sell cash equities and futures to generate distributions, making them a factor that can weigh on share prices. While expectations for a continued uptrend in stocks remain strong, the market is likely to stay marked by sharp price swings at elevated levels for the time being.

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