AI chip and earnings boost Nikkei in morning trade

2026-07-31

In morning trade on the 31st in Tokyo, the Nikkei Stock Average extended gains and traded 2,704 points, or 4.37%, higher at 64,572. At one point, it was up by more than 3,400 points. A rebound in artificial intelligence (AI) semiconductor stocks, following gains in U.S. equities, and strong earnings from domestic companies supported the market.

Buying returns to AI semiconductor stocks

During the morning session, Advantest and Tokyo Electron, two semiconductor manufacturing equipment makers, lifted the Nikkei by about 1,700 points. After their earnings reports, investors focused on expanding demand for AI-related products and stronger-than-expected results for the current fiscal year. Related shares such as Lasertec and Disco also rose broadly.

U.S. tech rally spills over

On the previous day in the U.S. stock market, Microsoft surged 15.5%. Its April-June 2026 results beat market forecasts, and it said free cash flow for the full year ending June 2027 was expected to remain in the black, easing concerns over excessive AI investment. Buying spread to AI semiconductor stocks, and the Philadelphia Semiconductor Index (SOX), which comprises major chip-related stocks, closed 8.1% higher the previous day. In South Korea on the 31st, SK Hynix and Samsung Electronics also rose sharply, and the benchmark KOSPI at one point gained more than 15%. In Japan, Kioxia Holdings was bid at the upper limit of its daily trading range, and semiconductor memory shares rose across the board.

Strong earnings and yen levels in focus

Strong earnings have also supported Japanese shares. Panasonic Holdings, which raised its forecast for the fiscal year ending March 2027 on the back of robust AI infrastructure demand, was bid at the daily limit up. Kyocera, Oriental Land, and Japan Tobacco are also being bought on the back of earnings results. According to Nomura Securities, the revision index (RI) for major companies' analyst earnings forecasts for the fiscal year ending March 2027 stood at 29.7 as of the 30th, up from 20.6 a week earlier and the highest level on a fiscal 2027 basis. Takashi Ito, senior strategist at Nomura, said, 'Uncertainty over developments in the Middle East and elsewhere has eased, and expectations for an improvement in the RI are high.'

Meanwhile, the government and the Bank of Japan were believed to have stepped in to buy yen and sell dollars, and the currency briefly strengthened rapidly. However, the exchange rate was still moving in the 160 yen per dollar range, and there is a view that 'as long as most companies are assuming an exchange rate of 150 to 155 yen per dollar, the benefits of a weak yen are still easier to focus on' (Ito of Nomura). Even so, Kioxia, which is due to announce earnings after the close on the 31st, faces high market expectations and is expected to see volatile trading. Shuji Hosoi, senior strategist at Daiwa Securities, said, 'Structural supply-demand concerns remain for leveraged exchange-traded funds (ETFs) linked to individual Korean stocks, so I am cautious about the recovery in semiconductor memory stocks,' adding that it will still take time for the Nikkei to return to its peak range.

Enjoyed this article? Share it with your network!