Japan Weekly Kickstart: More than meets the AI

This week's Japan Weekly Kickstart highlights the key points from our latest report on the Japan AI thematic: More than meets the AI: a new framework for Japan's expanding AI universe. AI-related stocks are expected to contribute one-third of FY26/FY27 TOPIX EPS growth, and they now account for a large share of the weighting in both the Nikkei 225 and TOPIX. Given their contribution to index-level growth and price performance, the risks of not being exposed to the AI thematic in Japan are likely to persist; however, higher levels of positioning concentration could also increase the frequency and impact of AI-driven market corrections. We establish a framework to categorize Japan's AI-exposed stocks based on each company's position within the broader AI value chain, with the two core groupings of AI Semiconductor Ecosystem (SM) and AI Data-Center Hardware (HW) further broken down into eight sub-layers;