The Zhitong Finance App learned that Bernstein gave a positive judgment on Japan's IT hardware and electronics sector: pointing out that its fundamentals are still strong, and the market is too pessimistic about AI. Software and IT services stocks rose about 30% in the past quarter, and AI-related stocks were under pressure due to excessive expectations. During the same period, FY26's profit expectations overall increased by 2% to 11%, and the decline in valuation turned into an entry window.
Bernstein said that Hitachi and Mitsubishi Heavy Industries have been the first choice for a long time, and Murata is currently the best entry point. Murata, Hitachi, NEC, Mitsubishi Electric, and Mitsubishi Heavy Industries all received the bank's “outperforming the market” rating.
The bank is optimistic about the three main lines of software and cybersecurity, AI components, energy, and military. The focus is on long-term configuration and the current entry point.
Three main lines
Main line 1: software and network security. The growth rate of software investment in Japan is expected to rise from +7.5% in 2025 to +10.3% in 2026. Investors from Fujitsu and Nomura Research confirm that demand for IT modernization, data, and AI is strong; Japanese companies are frequently attacked by cyber attacks, increasing the urgency of cybersecurity orders, and the sector as a whole benefits from the acceleration of local demand.
Main line 2: AI component (MLCC). MLCC (multilayer ceramic capacitors) supply and demand were tight, and the order-to-shipment ratio remained 1.5; Japan's MLCC exports increased 30% year-on-year from July to August, pointing to high revenue growth this quarter. Guoju, Samsung Electric, and Taiyo Electric have taken the lead in increasing prices by 10% to 20%. The implementation of the price increase is a key catalyst for this sector; BBU (battery backup unit) and CBU (capacitor backup unit) have brought structural increases, but the influx of new players has intensified competition.
Main line 3: energy, military industry, and yen. The power grid business consensus anticipates a year-on-year increase of 25% to 30%; global demand for gas turbines is expected to rise from 91 gigawatts in 2025 to 100 to 120 gigawatts, combustion engine orders are expected to exceed expectations, and military sector revenue is expected to continue to grow by about 20%. The dollar depreciated from 145 to 159 yen this quarter, and the export sector as a whole benefited.