TOKYO — Japan's Nikkei 225 stock index closed above 70,000 on Tuesday for the first time in about three months, and analysts at major brokerages continue to see opportunities in a market driven by artificial intelligence spending, rising interest rates and corporate governance reforms.

The Nikkei finished at 70,683.98, up 1.05%, extending a rally fueled by strong results from U.S. memory chipmaker Micron Technology and weaker-than-expected U.S. jobs data. The index remains below its record intraday high of 72,831.73 set in June.

Advantest
Advantest

Below are 10 Nikkei 225 companies that analysts have rated as buys in recent months, based on published broker research and consensus data. The list reflects analysts' views, not recommendations from this news organization. Price targets are forecasts that can prove wrong, and investors should consider their own circumstances and seek professional advice before investing.

1. Advantest (6857)

Jefferies raised its price target on the chip-testing equipment maker to 42,000 yen...

Correction in-line: Jefferies raised its target to 41,000 yen from 38,500 yen, citing record results driven by AI demand.

Advantest reported first-quarter sales of 367.5 billion yen, up 39% from a year earlier, and operating profit of 190 billion yen, up 53%, both records. The company raised its full-year guidance to sales of 1.714 trillion yen and operating profit of 846 billion yen.

The stock hit a record high on Monday, closing at 40,220 yen, close to Jefferies' target, meaning much of the expected upside may already be priced in.

2. Tokyo Electron (8035)

Singapore's DBS Bank rated the semiconductor equipment giant a buy with a target of 69,145 yen, according to its Japan coverage as of Sept. 4.

Tokyo Electron, one of the world's largest makers of chipmaking equipment, has been among the main drivers of the Nikkei's recent rally. Its shares jumped about 5.5% on Monday as AI-related stocks surged.

3. Tokyo Seimitsu (7729)

Jefferies named the semiconductor equipment maker one of its top picks and raised its price target to 24,000 yen from 23,000 yen.

The company reported record first-quarter orders of 53.2 billion yen, up 102% from a year earlier, with AI and high-performance computing sales more than doubling. Tokyo Seimitsu raised its full-year sales guidance to 189 billion yen, surpassing its medium-term goal.

4. Mitsubishi UFJ Financial Group (8306)

Japan's largest bank holds a consensus buy rating from analysts, with an average price target of around 3,700 yen among 11 analysts tracked by MarketScreener. DBS rated the stock a buy with a 4,000 yen target.

Japanese banks have benefited as the Bank of Japan raises interest rates after years of ultra-loose policy, boosting lending margins. MUFG shares are up more than 40% this year.

5. Sony Group (6758)

DBS rated the entertainment and electronics conglomerate a buy with a target of 5,550 yen.

Sony's businesses span PlayStation games, music, movies and image sensors. The company is expected to benefit from the November launch of "Grand Theft Auto VI," one of the most anticipated video game releases in years, on its PlayStation 5 console.

6. Toyota Motor (7203)

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DBS rated Japan's largest automaker a buy with a 3,500 yen target.

Toyota is the world's top-selling carmaker and a leader in hybrid vehicles. A weak yen, trading near 158 to the dollar, tends to boost the value of Japanese exporters' overseas earnings.

7. Chugai Pharmaceutical (4519)

Goldman Sachs upgraded the drugmaker to a buy rating in June with a price target of 8,950 yen.

Chugai, majority-owned by Swiss pharmaceutical giant Roche, is one of Japan's most valuable drug companies, with a pipeline that includes treatments for cancer and other diseases.

8. Shionogi (4507)

Goldman Sachs upgraded Shionogi to a buy in June and raised its price target to 3,400 yen from 3,300 yen, citing a stronger HIV franchise and upside from its COVID-19 treatment Xocova.

9. Kioxia Holdings (285A)

The memory chipmaker has been one of the market's biggest winners from the AI boom. Analysts' average price target stands far above the stock's price, according to data compiled by Simply Wall St, though targets for the volatile stock vary widely.

Kioxia shares jumped 5.55% on Oct. 1 after Micron's upbeat forecast lifted memory chip stocks.

10. Taiyo Yuden (6976)

The electronic component maker was the top gainer on the Nikkei on Tuesday, rising 6.15% to 11,135 yen. The company makes multilayer ceramic capacitors, tiny components used in smartphones, cars and AI servers.

Shares have nearly tripled over the past year, according to Simply Wall St data. Analysts' average target is above recent prices, though the stock's rapid rise means valuations are elevated.

Market backdrop

The Nikkei has been powered by AI and semiconductor stocks, with Advantest, Tokyo Electron and SoftBank Group among the heaviest contributors to gains.

But the rally has been narrow at times. On Oct. 1, when the Nikkei jumped 3.3%, more stocks in the index fell than rose, highlighting how a few heavyweight chip stocks can drive the price-weighted benchmark.

Risks

Investors face several risks. Japan's 10-year government bond yield hit 3% last month for the first time since 1996, and the Bank of Japan is expected to keep raising rates, which could strengthen the yen and weigh on exporters.

Concerns about Prime Minister Sanae Takaichi's expansionary fiscal policies, high oil prices tied to the conflict involving Iran, and rising U.S. bond yields also pose challenges.

Bank of America, in its year-ahead outlook, warned that the probability of downside scenarios was as high as its base case.

What's next

Investors will watch Bank of Japan Governor Kazuo Ueda's comments on interest rates, the upcoming corporate earnings season and further signals on AI spending from global technology companies.

This article is for informational purposes only and does not constitute financial advice.

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