Goldman Sachs has identified the recent sharp decline in Japanese artificial intelligence (AI) stocks as a buying opportunity. With stock prices having fallen significantly, analysts believe that strong corporate earnings could lead to a substantial rebound.
According to Bloomberg on July 29, Bruce Kirk, Goldman Sachs' chief Japan equity strategist, stated, "As long as geopolitical conditions do not deteriorate significantly, there are certain stocks worth increasing exposure to. We do not see the growth outlook for the AI industry as shaken."
Japanese AI stocks surged before experiencing a steep decline. The Nikkei 225 index rose approximately 44% to a peak in June before dropping 14%. Major AI beneficiaries, such as Kioxia Holdings and Furukawa Electric, have also fallen more than 40% from their highs.
The sell-off in stocks has spread beyond Japan, affecting AI-related stocks in South Korea and Taiwan as well. Concerns over excessive short-term price increases and whether large-scale AI investments will translate into actual profits have dampened investor sentiment.
Kirk predicts that future stock price movements will be determined by corporate earnings. He noted, "If solid earnings are reported, investors may refocus on the growth potential of AI companies at the lower price levels."
Major semiconductor companies in Japan are set to release their earnings soon. Advantest will kick off the announcements, followed by Tokyo Electron and Kioxia, while SoftBank Group is also preparing to disclose its earnings next month.
Goldman Sachs expects that the quarterly net income of companies in the TOPIX index, which represents the Japanese stock market excluding SoftBank Group, will increase by about 26% compared to the same period last year.
However, with hedge fund investments in Japanese stocks reaching a high level not seen in the past five years, there remains the possibility of significant short-term fluctuations in stock prices.
* This article has been translated by AI.
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