The "New King" of Japanese Chip Stocks is Born

Japanese chip testing equipment manufacturer Advantest's market value has surpassed 1 trillion yen for the first time, making it the largest company by market value among Japanese chip-related stocks.

On Wednesday, September 10, Advantest closed at 13,125 yen, with a market value exceeding 1 trillion yen (68 billion USD) for the first time, surpassing its peer Tokyo Electron for the first time since 2006, driven mainly by profit growth expectations fueled by AI demand.

In contrast, Tokyo Electron's AI-related sales account for a relatively small proportion of its total revenue, while also facing pressures from a slowdown in investments by chip manufacturers in other countries and a weak automotive and industrial semiconductor market.

According to Maito Yamamoto, chief analyst at Nissay Asset Management, Broadcom's recent strong performance indicates that tech giants like Google will increase their investments in AI chips, which will "provide a tailwind for Advantest's profits." As of Friday morning, Advantest's stock price has risen over 50% this year, far exceeding the gains of the Tokyo Stock Exchange Index.

(This year, Advantest's stock price increase far exceeds that of the Tokyo Stock Exchange Index)

Capital Flow and Stock Performance

Strong capital inflows have provided solid support for Advantest's stock price.

According to trading data from September 11, Advantest recorded a net inflow of 17.34 billion yen that day, making it one of the stocks with the highest net buying amounts. In contrast, stocks like Furukawa Electric experienced net outflows.

Over the past five years, its total stock return has reached 967.12%, reflecting investors' long-term confidence in its market strategy. In just the last quarter, its stock price surged by 58%, significantly outperforming the semiconductor industry's return rate of 13.3% during the same period.

In addition to benefiting from macro market trends, Advantest's own technological innovations are also key to consolidating its market position.

The company recently launched the next-generation CD-SEM E3660, designed to meet the stringent requirements of semiconductor manufacturing at the 2-nanometer advanced node, strengthening the company's business layout in the measurement field.

Furthermore, the company's stock repurchase plan, set to be completed by mid-2025, has further boosted investor confidence.

Valuation Premium and Future Risks

Despite the bullish market sentiment, Advantest also faces challenges and potential risks associated with high valuations.

Analysts believe that the company's stock price exceeding 14,000 yen is above the consensus target price of 11,562.11 yen, indicating that the stock is trading at a premium.

If the expected growth fails to materialize, the stock price may face a correction. Analysts predict the company's annual revenue growth rate to be 5.2% and profit growth rate to be 6.9%, indicating moderate growth.

Whether the company can achieve these expected growth targets and how it manages profit margin pressures and geopolitical uncertainties will be key factors influencing future stock price performance