Kioxia Holdings, a Japanese semiconductor company, has seen its stock price soar by 3,566% over the past year, with an increase of over 800% since the beginning of the year. This surge in demand for memory semiconductors, driven by investments in artificial intelligence (AI) data centers, has propelled Kioxia to surpass Toyota, a symbol of Japanese manufacturing, to become the top company by market capitalization on the Tokyo Stock Exchange. This remarkable achievement comes just a year and a half after Kioxia's initial public offering.
As of June 25, data from Companies Market Cap shows that the top ten companies by market capitalization in Japan are dominated by firms in the semiconductor, AI, and IT value chains. Kioxia leads with a market cap of $337.2 billion, followed by SoftBank Group at $236.5 billion, Mitsubishi UFJ Financial Group at $223.4 billion, and Tokyo Electron at $212.2 billion. Toyota, traditionally a leader in the manufacturing sector, is now in fifth place with a market cap of $198.6 billion.
In the sixth to tenth positions are Fast Retailing at $159.9 billion, Advantest at $156.0 billion, Sumitomo Mitsui Financial Group at $150.1 billion, Murata Manufacturing at $131.2 billion, and Hitachi at $127.4 billion. Excluding financial firms Mitsubishi UFJ and Sumitomo Mitsui, as well as Fast Retailing and Toyota, six of the ten companies benefit directly or indirectly from the semiconductor and AI value chains.
The landscape of Japan's stock market has changed significantly over the past decade. In 2017, the top companies were primarily in traditional sectors, with four telecommunications firms and two financial firms dominating the rankings. At that time, Toyota held the top position with a market cap of approximately $200 billion, followed by NTT, SoftBank, Mitsubishi UFJ, and NTT Docomo. The sixth to tenth positions included KDDI, Japan Tobacco, Keyence, Yucho Bank, and Nintendo.
In the last ten years, Japan's stock market has rapidly restructured around AI and semiconductor companies. Firms like Kioxia, Tokyo Electron, Advantest, and Murata Manufacturing have entered the top ten by market capitalization. Additionally, SoftBank Group, benefiting from investments in OpenAI, and Hitachi, recognized for its role in industrial digitalization, have contributed to this shift, leading to the emergence of the term 'Japan's Magnificent Seven' to describe these key players. Recent analysis by the Nihon Keizai Shimbun identified Kioxia, SoftBank Group, Tokyo Electron, Murata Manufacturing, Advantest, Hitachi, and Shin-Etsu Chemical as the driving forces behind Japan's stock market this year.
Meanwhile, the prominence of automotive stocks, which once led the market, has diminished significantly compared to a decade ago. As of March this year, the price-to-book ratios (PBR) for Japan's three major automakers—Toyota, Honda, and Nissan—were all below one, with Toyota at 0.88, Honda at 0.46, and Nissan at 0.22. Although Toyota remains a representative company in Japan, its stock price has stagnated, causing its market cap to fall to fifth place behind SoftBank Group, Mitsubishi UFJ, and Tokyo Electron. Furthermore, forecasts indicate that Toyota's net profit will decline for the third consecutive year.
Experts predict that the semiconductor rally in Japan will extend to AI-related materials and components, as well as automation and infrastructure across the semiconductor value chain. Choi Bo-won, a researcher at Korea Investment & Securities, stated, "The diverse semiconductor-related stocks in Japan are becoming a key driver for improving the fundamentals of Japanese companies." He added that the Takaiichi Cabinet plans to invest ¥68 trillion in AI semiconductors, ¥23.1 trillion in vertical AI, and ¥10.5 trillion in physical AI, emphasizing the need to pay attention to companies linked to the semiconductor and AI industries, including those involved in industrial automation, digitalization, and security.
* This article has been translated by AI.
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