TOKYO - With many investors still willing to bet on the artificial intelligence investment boom, the Tokyo stock market's rally that recently pushed the Nikkei index to the 70,000-point mark may continue, with progress in U.S.-Iran talks possibly brightening sentiment regarding broader sectors, analysts say.
The Nikkei jumped nearly 5 percent on June 15, the first trading session after the United States and Iran announced a deal to end hostilities, advancing to just below the 70,000 line and topping the threshold the following day.
Traders said the easing of tensions in the Middle East encouraged investors to double down on technology blue chips and hunt for laggards.
The fast-paced rally since last year of the Nikkei Stock Average, which is heavily weighted toward technology issues, has been driven by gains on optimism about the advancement of artificial intelligence.
Its rise has gained momentum in recent months, fueled by high expectations for agentic AI, goal-oriented autonomous software programs capable of carrying out self-directed tasks, analysts say.
It took two months for the Nikkei to reach 70,000 after topping the 60,000 line, compared with six months for the rise from 50,000 to 60,000 and over 19 months for the climb from 40,000 to 50,000.
The early phase of the Tokyo market's uptrend was largely supported by expectations for expansionary fiscal policy under Prime Minister Sanae Takaichi, and the trend, accelerated by optimism about generative AI, remains intact, said Masahiro Yamaguchi, head of investment research at SMBC Trust Bank.
The high computing demand of new AI systems, including Anthropic's Claude Mythos, is raising expectations for greater business opportunities for hardware manufacturers, he said.
"The current competitive environment makes it difficult (for technology companies) to survive without new investment," he said.
Hopes for a further AI-led market rally are supported by the favorable fundamentals of Japanese computing hardware suppliers, which suggest the Tokyo market has not yet shown signs of the AI investment boom being blown out of proportion, analysts say.
Whether the construction of massive data centers by hyperscalers makes business sense is "uncertain," but it "doesn't matter" for Japanese suppliers of components, said Shunsuke Kobayashi of equity research department at Mizuho Securities Co.
"Companies supplying components for AI data centers built by hyperscalers are like pickax and jeans sellers during the Gold Rush," capitalizing on the trend and potentially enjoying higher returns by selling supplies than mining for gold, Kobayashi said.
With the start of the U.S.-Iran talks and easing pressure on oil supply chains, investors' interest is radiating across broader sectors ahead of the quarterly earnings season next month, analysts say.
"The buying of high-tech issues with funds from selling other shares is still continuing," said Shota Sando, equity market analyst at the Tokai Tokyo Intelligence Laboratory Co., but he added that developments toward oil supply normalization could pave the way for the buying of a broader range of issues.
