Japan’s Nikkei soars to record highs as SoftBank soars amid AI fever

Japan’s Nikkei stock average rose to a new high on Thursday, with index heavyweight SoftBank Group rising more than 11% as investors bought into its vision of artificial intelligence-powered robots.

Robot maker Yaskawa Electric also shot up 9.5%, with these two stocks handily outperforming all others on the Japanese stock benchmark.

The tech-heavy Nikkei climbed 1.8% to end the day at 48,580.44, close to its intraday peak of 48,597.08 – both record levels.

SoftBank alone added 466 points to the Nikkei’s 845-point rally.

The broader Topix, on the other hand, gained a more moderate 0.7% to 3,257.77.

SoftBank said late in Wednesday’s trading session that it had bought the robotics business of Switzerland’s ABB, continuing the Japanese startup investor’s strategy of merging robotics and AI, although the announcement was initially largely ignored by the market. “The moves at SoftBank and Yaskawa are so big compared to everything else that it’s easy to think this is a delayed reaction,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management. “It feels a little overdone.” The Nikkei could be ripe for a pullback, with an oft-quoted gauge known as the relative strength index (RSI) at 77.6, well above the 70 level widely considered an indicator of overheating.

Notably, the auto sector was among the worst-performing sectors among the Tokyo Stock Exchange’s 33 industry groups, after hitting its highest level since the middle of last year on Wednesday.

The sector fell 1.3% despite continued weakness in the yen, which is boosting the value of foreign sales. Toyota fell more than 2%.

Japanese shares soared early this week after budget dove Sanae Takaichi was elected head of the ruling Liberal Democratic Party, making her the country’s next prime minister.

However, her rise is not assured, because her right-wing, hard, conservative politics causes friction with coalition partner Komeito, and the government has a minority of seats in both houses of parliament.

The market could see additional volatility after Uniqlo parent Fast Retailing unofficially kicked off earnings season with post-market results on Thursday. The stock ended the day 3.4% higher.

Daiwa Securities strategist Kenji Abe predicts the Nikkei could rise to 50,000 by the end of Japan’s fiscal year in March.

“Profits are improving,” he said. “The Nikkei can continue to rise.”

At the same time, “politics matters and can create short-term volatility,” he said. “The market has high expectations of Takaichi’s policy.”