Nikkei 225 surges 5% to near all-time high as chip stocks rally

The Nikkei 225 Index jumped more than 5% to 71,950 on Thursday, approaching its all-time high of 72,781 set earlier this month, as semiconductor and memory stocks surged on renewed AI optimism and a return of foreign capital to Japanese equities.

"The Nikkei's move reflects a powerful convergence of AI-driven demand for Japanese chip equipment and memory, combined with foreign investors rotating back into the market after a brief pause," said Masayuki Kubota, chief strategist at Rakuten Securities.

Kioxia Holdings led the rally with a gain of more than 33% over the past week, while Tokyo Electron added 16% and Advantest rose a similar magnitude. Keyence Corp. and Softbank Group also advanced sharply, tracking the broader tech rally. The surge followed Micron Technology's announcement of $22 billion in AI-related deals, which reignited global appetite for semiconductor names after a sharp selloff earlier in the week. The Philadelphia Semiconductor Index had plunged 7.9% on Tuesday before rebounding, while Tom Lee of Fundstrat called the chip-stock selloff a "textbook buying opportunity."

The rally extended across Asia, with South Korea's KOSPI climbing about 4% after tumbling 10% in the prior session — its steepest single-day drop since March. Samsung Electronics surged 10% on a report it may announce a 90 trillion won ($58.6 billion) buyback program, while SK Hynix jumped 11% on speculation its potential Nasdaq listing could trigger a rerating of memory-chip valuations. Taiwan's Taiex also advanced, tracking the regional rebound. Foreign investors returned to Japanese stocks last week, purchasing a net 479.4 billion yen ($2.96 billion) — their first net buying since May — according to Ministry of Finance data. The buying was driven by AI stock rallies and the US-Iran ceasefire deal that eased geopolitical risk premiums.

The move brings the Nikkei within striking distance of its record, but headwinds remain. The dollar index climbed to a 13-month high above 101 as Fed rate-hike bets intensified, with markets pricing a 37% chance of a July hike and 70% for September, per CME FedWatch data. A stronger yen — USDJPY slid to a 40-year low on rising Japanese interest rates — could pressure export-oriented earnings. Gold extended its losing streak to two-week lows near $4,088 as the dollar strengthened, while Brent crude fell to $76.11 per barrel as oil tanker traffic resumed through the Strait of Hormuz following the US-Iran truce.

For the Nikkei, the key question is whether momentum can carry it past the 72,781 record. The index is now trading at levels that reflect elevated expectations for AI-related capital expenditure, with South Korea and Taiwan also trading well above their five-year average valuations. Any moderation in AI spending or memory pricing could trigger a pullback. Still, the breadth of the chip rally, the scale of foreign inflows, and improving geopolitical conditions suggest the path of least resistance remains higher in the near term.

This article is for informational purposes only and does not constitute investment advice.