Nomura and Daiwa CEOs flag risk that AI may spoil stock market rally

Japan’s two largest securities firms expect the country’s stock market rally to extend well into 2027, even as a potential reversal in artificial intelligence investment looms as the primary threat.

“Markets, stock prices and corporate earnings are all being driven very strongly by investment in AI,” Nomura Holdings CEO Kentaro Okuda said at a Nikkei event in Tokyo on Thursday. “If sentiment toward AI were to shift and that trend went into reverse, I think that could pose a significant risk.”

Akihiko Ogino, CEO of smaller rival Daiwa Securities Group, made similar remarks on the same panel.

Both executives projected the Nikkei 225 Stock Average to reach 80,000, though their paths diverged: Ogino set that target for this year, while Okuda placed the index at about 75,000 by year-end and above 80,000 by end-2027. The gauge closed at 69,042.11 on Thursday.

Their remarks reflect confidence in a near four-year boom in Japanese equities, which are trading close to a record as AI investment, corporate governance reforms and a return to inflation encourage investors. The rally has also fueled earnings at the two securities firms, with both posting record profits last fiscal year.

Ogino said he expects the Nikkei to reach 88,000 toward the end of 2027, and that the yen would trade at about ¥160 per dollar through that period. Okuda projected the Japanese currency at about ¥156 per dollar at year-end, with a gradual strengthening thereafter as geopolitical concerns ease.

Ogino attributed the yen’s recent recovery from excessive weakness to joint intervention, U.S. Treasury Secretary Scott Bessent’s calls for the Bank of Japan to raise rates, and the central bank’s September hike. He described rising rates as a “positive development” that reflected economic growth.

Okuda said overseas investors retained strong interest in Japan and that the negative impact of higher rates had not been significant so far. He added that conflicts in the Middle East and Ukraine may be prolonged, potentially pushing up energy prices and disrupting supply chains.

Both executives pointed to the possibility that recent public opposition to AI and data centers in countries including the U.S. would lead to a drop in investment in the sector.

“The biggest concern is how market participants will respond,” Ogino said. “They can change their views dramatically over a very short period of time, causing sharp swings in asset prices. Those market moves can amplify the impact of a risk far beyond what is happening in the real economy. I think that is the biggest challenge.”