Japan chip earnings roundup: AI a double-edged sword

Japan's leading semiconductor firms reported mostly positive earnings for the September quarter, driven by artificial intelligence (AI) demand. However, their stocks saw mixed reactions, as some companies fell short of expectations, while broader worries about AI spending also impacted them. Advantest and Tokyo Electron both exceeded forecasts and provided optimistic guidance.

Kioxia, Disco, and Renesas saw their shares fall, despite strong to solid financial results. These five firms are the largest by market capitalization in the Japanese semiconductor sector. Advantest raised its fiscal 2027 operating profit forecast to ¥967 billion, up from ¥846 billion. First-half revenue and operating profit both jumped significantly, thanks to AI chip test demand outpacing expectations.

Tokyo Electron also boosted its operating profit guidance by 87%, to ¥1.17 trillion, announcing a ¥150 billion share buyback. Bull case investors argue that AI test and equipment demand continues to exceed forecasts, while bearish analysts caution that valuations, such as Advantest's 45.3x trailing P/E ratio, leave little room for growth if AI capital expenditure growth slows.