According to Barclays strategist Ajay Rajadhyaksha, investors interested in the AI sector should consider Japan, as its market is less concentrated than those of South Korea and Taiwan, which are dominated by major chipmakers like Samsung Electronics and Taiwan Semiconductor Manufacturing Co.
The Nikkei 225 has risen approximately 32% this year, benefiting from a broader range of sectors including retail, telecommunications, and pharmaceuticals, rather than being overly reliant on semiconductor stocks. The top 10 stocks in the Nikkei account for about 45% of the index, significantly lower than the concentration in the Kospi and Taiex.
Additionally, Japanese firms play crucial roles across the semiconductor value chain, which positions them well to capitalize on the ongoing AI tech rally. Chetan Seth from Nomura noted that the Nikkei's performance is partly driven by AI-related stocks, with SoftBank being a significant player.
Beyond AI, Barclays highlights positive changes in Japan's economy, such as governance reforms and rising shareholder returns, which are enhancing capital efficiency and supporting earnings growth amid a return to inflation