Japanese Tech Stocks Ride AI Chip Demand and Stimulus

Japan's technology sector is experiencing significant changes due to rising inflation pressure, a weaker yen, and a ¥2.3 trillion government stimulus package focused on new technologies.

The stimulus package has led to increased demand for advanced manufacturing equipment, which benefits companies like Advantest (TSE:6857), Tokyo Electron (TSE:8035), and Renesas Electronics (TSE:6723).

Advantest generates most of its revenue from its Test System Business at ¥1.0194 trillion, with a smaller contribution from Services and Others. It has high net margins and return on equity but also relies heavily on external borrowing and depends on AI and high-performance computing demand.

Tokyo Electron reports significant sales and earnings and is targeting higher margins through high-value equipment and services. However, it trades on a rich P/E ratio and faces funding risk from external borrowing.