European and US investors remain broadly optimistic on Japanese semiconductor and technology materials stocks, with Kioxia still the top pick

Overview

This report is J.P. Morgan's summary of feedback following meetings with US and European investors during the week of June 22, covering Japanese semiconductor equipment, NAND memory, technology materials, and related companies. The core conclusion is that although elevated valuations have raised some concerns, investors remain positive on the industry's upcycle, WFE market expansion, NAND supply and demand, and the growth prospects of key Japanese equipment and materials companies.

Core views

The report is most bullish on Kioxia, followed by Tokyo Electron, then Advantest and SCREEN Holdings, and then Nittobo and JX Advanced Metals. The core logic includes: WFE market forecasts may still be revised upward, especially as Terafab could become an incremental driver pushing CY2028 market size above US$250 billion; expectations for NAND prices and long-term agreement terms are more bullish; and high exposure to DRAM or TSMC, pricing power, and technological barriers are the main criteria for stock selection.

Analysis framework

The report uses investor meeting feedback, top-down WFE market forecasts, storage supply-demand and pricing assessments, comparisons of company business exposure, and cross-checking against valuation/performance tables, with a focus on comparing each company's growth elasticity across AI, DRAM, NAND, front-end equipment, and high-end materials.

Methodology notes

• Industry cycle analysisWFE market forecast

  Assess the semiconductor equipment demand cycle through wafer fab equipment spending.

  The report provides WFE forecasts for CY2026-CY2028 and discusses the potential upside contribution of TSMC capex, DRAM, and Terafab to industry size.

• Investor sentiment analysisFeedback from meetings with European and US investors

  Use the focus points and areas of debate from multiple investor discussions to identify changes in market expectations.

  The report notes that investors are most focused on Kioxia, WFE upward revisions, NAND prices, LTA terms, and companies with high exposure to DRAM/TSMC.

• Comparative company analysisComparison of exposure and pricing power

  Compare companies' growth exposure and pricing power in areas such as DRAM, TSMC, NAND, InP substrates, and high-end fiberglass.

  The report believes that exposure to high-growth niche markets, product scarcity, pricing adjustment capability, and technological entry barriers are the key factors differentiating stock attractiveness.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• KIOXIA Holdings (285A.T)

  Core top pick; Overweight

  Strengths

  Improving LTA expectations, NAND prices stronger than expected, and Super High IOPS could further tighten supply and demand while boosting earnings.

  Weaknesses

  Expectations for price increases are already strong, and the report expects prices in consumer applications may decline from 2027 onward.

  Comparison

  Ranks first in both discussion intensity and preference order, with investor expectations stronger than J.P. Morgan's forecasts and Asian investor expectations.

  Risks

  Declining NAND prices, LTAs falling short of expectations, and slower-than-expected ramp-up of Super High IOPS.

• Tokyo Electron (8035.T)

  Preferred recommendation; Overweight

  Strengths

  Holds a strong position in high-growth equipment categories such as etch, deposition, and EUV co-development, with high DRAM weighting and room to improve margins through price increases.

  Weaknesses

  Valuation and cycle expectations may already reflect many optimistic scenarios.

  Comparison

  Second only to Kioxia in preference order, with DRAM-related attractiveness higher than SCREEN's current exposure.

  Risks

  WFE upward revisions falling short of expectations, slower DRAM investment, and lower acceptance of price increases.

• Advantest (6857.T)

  Recommended; Overweight

  Strengths

  Rising contribution from new systems, expanding CPU and CPO opportunities, and potential increases in outsourced customer testing.

  Weaknesses

  The share price is pressured by lower expectations for next-generation GPU testing time, concerns that ASIC testing time may be shorter, and worries about ASIC share loss.

  Comparison

  Tied with SCREEN in the third preference tier, and the report still maintains a positive stance.

  Risks

  Loss of ASIC share, SoC tester TAM not being revised upward, and GPU/ASIC testing time below expectations.

• SCREEN Holdings (7735.T)

  Recommended; Overweight

  Strengths

  Benefits from WFE growth and increasing complexity in DRAM cleaning processes, with room for future DRAM share expansion.

  Weaknesses

  DRAM applications accounted for only 12% of FY2025 SPE sales, lower than Tokyo Electron and Kokusai.

  Comparison

  Its valuation discount partly stems from relatively low DRAM exposure, but technological evolution could improve its relative positioning.

  Risks

  DRAM share gains slower than expected, insufficient growth in cleaning equipment demand, and sector valuation correction.

• Nittobo (3110.T)

  Recommended; Overweight

  Strengths

  T-glass TAM may expand with MLC and AI DDR applications, and management plans to increase T-glass capacity to three times the FY2023 year-end level by the end of FY2027.

  Weaknesses

  Recent share price weakness and a lack of near-term catalysts; management denies further price hikes this fiscal year.

  Comparison

  Investor attention is high, but there are differing views on competition, supply-demand, and PTFE substitution.

  Risks

  Intensifying T-glass competition, looser supply-demand conditions, and the impact of PTFE on the growth prospects of NE/NER-glass.

• JX Advanced Metals (5016.T)

  Recommended; Overweight

  Strengths

  Actively investing in InP substrates, targeting a 7-10x capacity expansion by FY2030, with potential to build a medium- to long-term earnings pillar in optoelectronic integration.

  Weaknesses

  Investor interest is uneven, partly due to concerns over copper prices.

  Comparison

  Compared with its traditional sputtering target business, InP substrates better reflect high barriers and long-term growth.

  Risks

  Copper price volatility, weaker-than-expected revisions to InP demand or pricing, and execution risk in capacity expansion.

Key data

• WFE market forecastUS$159 billion in CY2026, US$205 billion in CY2027, and US$237 billion in CY2028Representing YoY growth of 28%, 29%, and 16%, respectively; the report believes TSMC capex, DRAM, and Terafab could provide upside.
• Potential Terafab investment scaleInitial investment of US$55 billion, with total investment potentially reaching US$119 billionMentioned at the June 3 Grimes County public hearing; attracted high attention from US investors.
• Investor expectations for NAND pricesApr-Jun +70%-90% QoQ, Jul-Sep +20%-35% QoQ, Oct-Dec +10%-30% QoQHigher than J.P. Morgan's related forecasts for Kioxia of +69%, +20%, and +8%.
• Kioxia price and target priceCurrent price ¥88,450, target price ¥155,000Price as of the June 29, 2026 close, rated Overweight.
• Share of DRAM equipment salesTokyo Electron 31%, Kokusai 30%, SCREEN Holdings 12%The report believes SCREEN's lower DRAM exposure is one reason for its valuation discount, but increasing cleaning process complexity could drive share expansion.

Impact & implications

If WFE market upward revisions, rising NAND prices, and improving long-term agreements continue to materialize, earnings expectations for leading Japanese semiconductor equipment and technology materials companies may continue to be revised upward. Kioxia benefits from tight NAND supply-demand and Super High IOPS; Tokyo Electron and SCREEN benefit from front-end equipment and expanding DRAM investment; Advantest benefits from opportunities in CPU, CPO, and outsourced testing; while Nittobo and JX Advanced Metals benefit respectively from the medium- to long-term growth of high-end fiberglass and InP substrates.

Risks

• High valuations may limit further upside for the sector.
• WFE market upward revisions depend on TSMC capex, DRAM investment, and Terafab progress, with uncertainty in timing and scale.
• If NAND prices and LTA terms come in below market expectations, Kioxia's earnings elasticity may be revised down.
• Advantest faces expectation risks related to GPU/ASIC testing time, ASIC share, and SoC tester TAM.
• Nittobo faces uncertainty from T-glass competition, looser supply-demand conditions, and PTFE substitution pathways.
• JX Advanced Metals is affected by copper prices, InP substrate capacity expansion, and the realization of price adjustments.

What to watch

• Terafab's investment cycle, equipment procurement timing, and whether it pushes the CY2028 WFE market above US$250 billion.
• The impact of LTA terms from memory makers such as Micron on Kioxia's customer negotiations.
• The divergence between eSSD and consumer NAND prices in 2H 2026 through 2027.
• CPU tester trends at Advantest's Apr-Jun earnings call and whether management raises SoC tester TAM.
• Whether Nittobo announces major investments for FY2028 demand and related price hikes in the Jul-Sep quarter or later.
• Progress in JX Advanced Metals' InP substrate capacity expansion, price revisions, and optoelectronic integration demand.