The divergence between AI-related and non-AI stocks in Japanese equities is intensifying

Overview

This is a quantitative research memo by Nomura on Japanese equities, with a core focus on the widening divergence between AI-related stocks and non-AI stocks. The report argues that the divergence between winners and losers within AI-related stocks since the start of the year has evolved into a broader market split between AI-related stocks and other stocks. Investors are now more inclined to express an AI allocation tilt, causing some non-AI stocks—especially those with high foreign or investment trust ownership and weak 12-month price momentum—to face sustained selling pressure.

Core views

The report's core views are: first, stock selection in the Japanese market has recently become increasingly centered on the AI theme; second, high foreign ownership and high investment trust ownership themselves have performed reasonably well since April, but within those groups, low-momentum stocks have come under clear pressure since mid-June; third, returns of high-ownership, high-momentum stocks have risen over the same period, indicating that capital may be selling underperforming non-AI stocks and reinforcing an AI tilt; fourth, institutional portfolio rebalancing at half-year-end and quarter-end may briefly reverse this trend.

Analysis framework

The report uses a two-stage portfolio sorting method: it first screens stocks with relatively high foreign ownership or investment trust ownership, then groups them by 12-month price momentum to observe the excess return performance of different portfolios. The report also combines recent investment theme analysis to judge whether capital is actively increasing AI-related exposure, and uses charts to list watchlists of high foreign ownership, high investment trust ownership, and low-momentum stocks.

Methodology notes

• Quantitative Factor12-month Price Momentum Grouping

  Distinguish high-momentum and low-momentum stocks based on price momentum over the past 12 months.

  The report uses 12-month price momentum as the second-layer sorting metric to identify lagging stocks among those with high foreign or investment trust ownership, and to observe whether these stocks are encountering sustained selling pressure.

• Quantitative FactorForeign Ownership Ratio Factor

  Use non-resident investor ownership ratio to measure foreign crowding or foreign allocation exposure.

  The report points out that the foreign ownership ratio factor has performed well since April, but stocks with high foreign ownership and low momentum have weakened since mid-June, which may reflect foreign investors or follower capital reducing positions in lagging names.

• Quantitative FactorInvestment Trust Ownership Ratio Factor

  Use investment trust ownership ratio to measure domestic institutional or fund allocation exposure.

  The report similarly examines stocks with high investment trust ownership and argues that among them, low-momentum non-AI stocks may face continued selling pressure.

• Trading BehaviorPeriod-end Rebalancing and Reverse Window Dressing

  Institutions adjust portfolios at half-year-end or quarter-end to display holdings more aligned with popular themes.

  The report believes institutional investors may increase AI tilt at period-end and sell lagging non-AI stocks; however, when formal rebalancing occurs, a brief reversal of this trend may also appear.

Asset mapping & comparison

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

• Japanese equity market

  Research target

  Strengths

  Structural market opportunities driven by the AI theme and rising returns of high-momentum stocks.

  Weaknesses

  Non-AI and low-momentum stocks are under pressure, and market divergence is intensifying.

  Comparison

  Compared with broad market beta, the report places more emphasis on the interaction among AI relevance, ownership ratio, and momentum.

  Risks

  Period-end rebalancing, reversal of crowded thematic trades, and macro and market volatility may change short-term performance.

• AI-related stocks

  Relatively favored direction

  Strengths

  Supported by the investment theme and may attract institutions to increase portfolio tilt.

  Weaknesses

  If thematic trading becomes overly crowded, valuation and reversal risks may emerge.

  Comparison

  More favored by capital than non-AI stocks, especially showing stronger performance in high-momentum portfolios.

  Risks

  A decline in thematic enthusiasm or rebalancing-related selling may lead to pullbacks.

• Non-AI high-ownership low-momentum stocks

  Key risk exposure

  Strengths

  If period-end rebalancing triggers a reversal, a short-term recovery may occur.

  Weaknesses

  High foreign or investment trust ownership combined with weak price momentum may make them targets for position reductions.

  Comparison

  They have clearly underperformed high-ownership, high-momentum stocks recently.

  Risks

  Selling pressure may continue if the AI theme persists; if positioning is crowded, liquidity and price impact risks will be higher.

Key data

• Report Date2026-06-23The file date is shown as 20260623.
• Research InstitutionNomuraThe report was produced by Nomura Securities Co., Ltd.
• Research ScopeJapanese equity quantitative researchBoth the title and body point to Japan equity quant memo and Japan quantitative research.
• Rating Distribution DisclosureBuy 57%，Neutral 41%，Reduce 2%Nomura Group global equity research rating distribution, as of March 31, 2026.
• Core Stock Screening DimensionsHigh foreign ownership ratio or high investment trust ownership ratio, combined with low 12-month price momentumFigures 4 and 5 in the report list the relevant watchlist stocks, but the input text does not provide the specific stock list.

Impact & implications

For portfolios, the report suggests that short-term returns in Japanese equities may continue to be affected by crowded trading in the AI theme. Investors need to distinguish between AI-related high-momentum stocks and non-AI low-momentum stocks, especially monitoring whether non-AI names with high foreign and investment trust ownership continue to be reduced. At the same time, as half-year-end and quarter-end approach, portfolio rebalancing may cause a temporary reversal in trading direction, so the current trend should not be extrapolated linearly.

Risks

• AI thematic trading may become overly crowded, leading to subsequent reversal.
• Half-year-end and quarter-end rebalancing may temporarily reverse the current trend of selling non-AI stocks.
• The report input does not include the full stock lists in Figures 4 and 5, so stock-level details cannot be cross-checked.
• Past performance and historical simulations do not represent future returns.
• The performance of foreign ownership, investment trust ownership, and momentum factors may be affected by changes in macro conditions, exchange rates, market liquidity, and risk appetite.

What to watch

• During end-June and quarter-end institutional rebalancing, whether high-foreign-ownership or high-investment-trust-ownership low-momentum stocks show a short-term rebound.
• Whether the relative return gap between AI-related stocks and non-AI stocks continues to widen.
• Within high-ownership factors, the excess return spread between high-momentum and low-momentum portfolios.
• Whether non-AI stocks continue to see capital outflows or increased trading volume.
• Subsequent price performance and position changes of the stocks listed in Nomura's Figures 4 and 5.