Bernstein Bullish on Japanese Semiconductor Stocks

Positive Outlook for Japanese Semiconductor Sector as Demand Rises

Bernstein has launched coverage on Japanese semiconductor stocks with an optimistic perspective, anticipating significant benefits from the global surge in chip demand and advancements in artificial intelligence (AI).

The brokerage noted that after a considerable decline from their peak in July, semiconductor valuations have become considerably more appealing, particularly within the semiconductor production equipment (SPE) sector.

Bernstein highlighted the strength of Japan’s SPE sector, emphasizing the accelerated efforts by governments worldwide to enhance local production capabilities.

Among the top picks in this area are Disco Corp, Advantest Corp., and Tokyo Electron Ltd., all of which Bernstein has rated as "Outperform." In contrast, Screen Holdings and Kokusai Electric Corp. received "Market Perform" ratings, while Lasertec Corp was rated as "Underperform."

The brokerage expressed particular enthusiasm for Japanese SPEs, suggesting that growth in this sector is likely to outpace the global average due to rising AI demand.

Regarding Japan’s chipmaking materials and the analog sector, Bernstein maintained a neutral outlook, noting potential challenges due to competition and overcapacity. In the materials sector, Hoya Corp was rated "Outperform," SUMCO Corp. was rated "Market Perform," and Ibiden Co. Ltd. was rated "Underperform."

In the analog sector, Bernstein anticipates short-term weaknesses linked to high inventories but predicts robust long-term growth driven primarily by the AI industry. The brokerage rated Renesas Electronics Corp. as "Outperform," highlighting its significant exposure to AI servers.