Tokyo, Nov. 15 (Jiji Press)–Many publicly traded Japanese companies that close their books in March have reported higher profits for the April-September first half of the current business year, aided by robust demand related to the ongoing artificial intelligence boom. Companies in the manufacturing sector fared strongly, in particular. A number of firms revised up their full-year earnings forecasts. However, uncertainty over the business environment is high due to factors including rising raw material costs amid turmoil in the Middle East, while concerns are growing over the outlook for AI-related investment after the U.S. midterm elections saw the Democratic Party, which campaigned on restricting data center construction, perform well. AI Semiconductor “Megacycle” “We have received more AI-related demand than we had anticipated,” Panasonic Holdings Corp. President Yuki Kusumi said, expressing satisfaction with the major electronics maker’s strong earnings results. Sales of electricity storage systems and components for data centers increased, pushing up the firm’s group operating profit to a record high for the April-September period. Chip-testing device maker Advantest Corp. posted record group sales, operating profit and net profit for the first-half period. Group CEO Douglas Lefever said, “The AI-related semiconductor market is experiencing a period of high growth that could now be described as a ‘megacycle.'” U.S. technology companies competing fiercely to develop cutting-edge AI models have invested significant capital into data center construction to secure computing capacity. This has benefited Japanese companies with strengths in chipmaking equipment and parts, which are essential to building AI infrastructure. According to a tally by SMBC Nikko Securities Inc., 967 companies with March book closings that are components of the Tokyo Stock Exchange’s TOPIX stock index have announced their April-September earnings by Thursday, and 690 of them posted higher ordinary profits. Meanwhile, 369 companies raised their full-year net profit forecasts, far outnumbering the 74 that revised down their projections. Prolonged Middle East Turmoil Of Japan’s seven major automakers, five including Toyota Motor Corp. posted higher net profits or returned to profitability, buoyed by the yen’s depreciation. However, prolonged turmoil in the Middle East is casting a shadow over their business outlook. Honda Motor Co. said that raw material costs rose by 170 billion yen from a year earlier amid higher crude oil prices. “We have no choice but to work hard to absorb the expenses while cooperating with our suppliers to reduce costs,” Honda Executive Vice President Noriya Kaihara said. Major banking groups reported strong earnings as lending margins improved with rising domestic interest rates, which had remained near zero for a long time. However, higher interest rates are a headwind for companies with heavy debts. Among them, Nissan Motor Co. posted a first-half group net loss for the second consecutive year as higher interest payments offset the effects of cost cuts. AI Growth in Doubt The U.S. midterm election results have fueled concerns about the sustainability of the AI boom. If tighter U.S. regulations put the brakes on vigorous data center construction, this could undermine the prospect for AI growth, which has spurred massive investment. Japanese technology investor SoftBank Group Corp. is betting heavily on AI growth, such as pouring a total of 64.6 billion dollars in U.S. AI developer OpenAI. SoftBank Group Senior Vice President and Chief Financial Officer Yoshimitsu Goto said he believes the investments “will be a major plus in the medium to long term.” Meanwhile, executives at other companies have expressed concerns over data center construction and AI investments going forward. The midterm election results “could have an impact, but it is difficult to estimate how much investment would slow,” said Minoru Kida, executive officer of Mitsubishi Chemical Group Corp. “There is a possibility of a dip in the short term,” said JX Advanced Metals Corp. President Yoichi Hayashi. END [Copyright The Jiji Press, Ltd.]
