Japan Equity Strategy: Decline in AI stocks and seasonality of return reversals

研报英文原文证据摘录

Japan Equity Strategy: Decline in AI stocks and seasonality of return reversals

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Japan Equity Strategy

Decline in AI stocks and seasonality of

return reversals

Investment Strategy

11 June 2026

AI stocks' dominance falters amid Middle East tensions Investment Strategy

On 10 June, US markets fell sharply, led by AI stocks, after President Trump talked about Japan

renewed attacks on Iran. Although selling pressure had been mounting since the release Masashi Akutsu >>

of US employment data, the escalation of tensions in the Middle East likely spurred this Strategist

BofAS Japan

sell-off. Previously, market volatility had been declining amid a sustained ceasefire. +81 3 6225 7754

Funds concentrated in high-beta AI stocks with strong expectations for growth, while masashi.akutsu@bofa.com

other sectors were shunned due to earnings uncertainty, creating a landscape of AI Tetsuhiro Tokuyama >>

Strategist

dominance. BofAS Japan

+81 3 6225 8499

We have previously argued that the initial sharp rise in AI stocks has run its course, and tetsuhiro.tokuyama@bofa.com

the market has entered a phase of increasing volatility (see our 26 May Japan Insight

report). However, we believe an AI-driven market is likely to continue for a long time,

probably until the Fed begins a series of interest rate hikes. Although the outlook for the

Middle East is uncertain, President Trump's approval rating for his inflation policies has

fallen below 30% (Exhibit 1). With the November midterm elections in mind, an early

resolution to the situation cannot be ruled out. There is also a significant risk of

opportunity loss if exiting AI stocks prematurely. Based on these observations, we still

recommend AI stocks as the core of portfolios, while noting the need for sector