Nikkei hits record high as AI chip frenzy powers Japan stocks

Japan’s Nikkei 225 climbed to a record high on Wednesday, as a rally in semiconductor shares outweighed weakness in banks and real estate stocks.

The benchmark index rose 1.25% to 65,811.78 as of 0147 GMT, after touching an intraday high of 66,428.81. The broader Topix index advanced 0.15% to 3,944.19.

Chip-related stocks led the gains, tracking strength in US technology shares overnight.

Tokyo Electron and Advantest climbed more than 5% each, making them the biggest contributors to the Nikkei’s advance.

The move extended a powerful rally in semiconductor-linked names, as investors continued to favour companies seen as beneficiaries of artificial intelligence spending.

“Investor money is concentrated on high-flying chip-related shares. There is no need to buy value shares when technology shares are giving solid returns,” Kazuaki Shimada, chief strategist at IwaiCosmo Securities, told Reuters.

Shimada said the Japanese market had mirrored Wall Street’s overnight performance, where semiconductor stocks rose even as the Dow Jones Industrial Average declined.

AI rally remains selective

The gains were not broad-based across the technology sector.

SoftBank Group fell 4.3%, while chip designer Socionext dropped 5.8%, making it the worst percentage performer on the Nikkei.

“Even within the AI-theme stocks, investors are rotating their targets,” said Shuutarou Yasuda, market analyst at Tokai Tokyo Intelligence Laboratory.

That rotation suggested investors were becoming more selective after the sharp run-up in artificial intelligence-related shares.

The S&P 500 and Nasdaq had both closed at record highs in the previous US session, as optimism over AI demand outweighed concerns over Middle East peace talks and recent US strikes on Iran. The Dow fell 0.23%.

Banks and property stocks lag

Away from semiconductors, the Japanese market was more uneven.

Banking shares declined, with the Nikkei bank index down 0.76%.

Real estate stocks were weaker, with the sector index falling 1.48%, making it the worst-performing group among the Tokyo Stock Exchange’s 33 industry sub-indexes.

Market breadth was also mixed. Of nearly 1,600 stocks on the TSE Prime Market, 44% advanced, 52% declined and 3% were unchanged.

The split performance underscored how concentrated the latest leg of the rally has become. While heavyweight chip stocks continued to push the Nikkei to fresh records, other sectors struggled to participate.

For now, investors remain focused on semiconductor demand tied to artificial intelligence infrastructure.

But the weakness in banks, property and some technology names showed that the broader market has yet to fully join the rally.