The evolution of Japan’s stock market
Japan’s stock market has seen significant shifts in recent years. During the early phase of the Covid period, growth stocks outperformed due to high earnings expectations. However, as the pandemic progressed and US Treasury yields rose, value stocks took the lead, supported by Japan’s stable interest rates. Since September 2023, these segments have aligned, marking a new growth phase for growth stocks as earnings forecasts improve.
Disco and the semiconductor revolution
In the semiconductor industry, Japan remains a pivotal player, with companies like Disco standing out for innovation and market leadership. Disco specializes in precision tools and dominates the global market for silicon wafer processing, holding a 70-80% share. Its tools are vital for chip production, including cutting, grinding, and dividing dice.
A notable strength of Disco is its recurring revenue model, driven by the sale of consumables needed at every production stage. This strategy ensures stability even during market downturns, offsetting the cyclical nature of the semiconductor industry.
Artificial intelligence and new horizons
The rise of artificial intelligence (AI) is further boosting growth prospects for Disco. The increasing demand for data centers and high-bandwidth memory requires thinner and more efficient chips, a field where Disco’s high-precision solutions are indispensable. For instance, Nvidia’s new Blackwell GPU will feature a configuration stacking 12 dice, significantly increasing the need for Disco’s grinding wheels.
Future outlook and investment potential
Despite challenges like a stronger yen and geopolitical uncertainties, Disco represents a promising long-term investment. With the artificial intelligence narrative still unfolding and a growing demand for innovative semiconductor solutions, Japan remains a global leader in the tech sector.
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