Japan Quant Strategy: NKY rallies – Sign that worst is over? AI semiconductors a long way off from recapturing their leading role

Research evidence excerpt

Japan Quant Strategy: NKY rallies – Sign that worst is over? AI semiconductors a long way off from recapturing their leading role

J P M O R G A N Global Markets Strategy

21 July 2026

Japan Quant Strategy

NKY rallies – Sign that worst is over? AI

semiconductors a long way off from recapturing their

leading role

Putting the brakes on one-sided pessimism Global Quantitative and Derivatives

StrategyThe Nikkei Average rebounded sharply to 66,000 today (July 21). The market

continued to show weakness over the latter half of last week, particularly in AI Masanari Takada AC

semiconductor-related stocks, and investor sentiment had become even more (81-3) 6736-8636

cautious. However, the recent pullback was not accompanied by a downward masanari.takada@jpmorgan.com

JPMorgan Securities Japan Co., Ltd.

revision in earnings expectations but rather appears to have been largely influenced

Tony SK Lee

by a shift in the AI-related narrative and position adjustments by momentum

(852) 2800-8857

traders. tony.sk.lee@jpmorgan.com

J.P. Morgan Securities (Asia Pacific) Limited/ J.P.

Given that Japanese stock sentiment has fallen to around zero and the TOPIX's Morgan Broking (Hong Kong) Limited

NTM EPS has not collapsed, additional factors are becoming necessary for Robert Smith, PhD

pessimism to spread further. Meanwhile, sentiment toward South Korean stocks (61-2) 9003-8808

robert.z.smith@jpmorgan.com

continues to deteriorate significantly. Japanese stocks, mainly memory J.P. Morgan Securities Australia Limited

semiconductor stocks, are still susceptible to global AI-related narratives. While Khuram Chaudhry

earnings momentum specific to Japanese stocks is firm, the sustainability of (44-20) 7134-6297