A new "king" of Japanese chip stocks is born.
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The market value of Japanese chip testing equipment manufacturer Advantest has surpassed 10 trillion yen for the first time, making it the largest chip-related stock by market capitalization in Japan.
On Wednesday, September 10, Japanese chip testing equipment maker Advantest closed at 13,125 yen, with its market value breaking through 10 trillion yen (USD 6.8 billion) for the first time. This marks its first time surpassing its peer Tokyo Electron since 2006, with the main driver being 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. The company also faces pressure from slowed investment by chip manufacturers in other countries and weakness in the automotive and industrial semiconductor markets.
According to Nissay Asset Management's chief analyst Maito Yamamoto, Broadcom's recent strong performance indicates that tech giants such as Google will increase investment in AI chips, which will “provide a tailwind for Advantest's profits.” As of early trading on Friday, Advantest's share price had risen more than 50% this year, far outpacing the TOPIX index.
(Since the start of this year, Advantest's share price increase has far exceeded the TOPIX index.)
Capital Flows and Share Price Performance
Strong capital inflows have provided solid support for Advantest's share 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 most heavily net bought stocks. In contrast, stocks such as Furukawa Electric experienced net capital outflows.
Over the past five years, its total stock return has reached as high as 967.12%, reflecting investors' long-term confidence in its market strategy. In the most recent quarter alone, its share price surged 58%, far outperforming the Japanese semiconductor industry's return rate of 13.3% during the same period.
In addition to benefiting from macro market trends, Advantest's own technological innovation is also key to consolidating its market position.
The company recently launched the new generation CD-SEM E3660, aiming to meet the stringent requirements of 2nm advanced node semiconductor manufacturing, further strengthening its business layout in the measurement field.
In addition, the company's stock buyback program to be completed by mid-2025 has further boosted investor confidence.
Valuation Premium and Future Risks
Despite strong market sentiment, Advantest also faces challenges and potential risks arising from its high valuation.
Analysts believe the company's share price above 14,000 yen is already higher than the consensus target price of 11,562.11 yen, indicating the stock is trading at a premium.
If the expected growth fails to materialize, the share price could face a pullback. Analysts forecast the company’s annual revenue growth rate at 5.2% and profit growth rate at 6.9%, both representing moderate growth.
Whether the company can achieve these expected growth targets, and how it manages profit margin pressure and risks such as geopolitical uncertainty, will be key factors influencing its future share price performance.
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