Japan's Largest Tech Fund Claims AI Stocks Not in Bubble Amid Market Volatility

This analysis is based on a Bloomberg report [1] published on November 7, 2025, reporting that Yasuyuki Fukuda, chief portfolio manager of Nomura Asset Management’s Japanese Information Electronics equity fund, declared AI stocks are not in a bubble and have further growth potential. The statement emerges during significant market volatility, with the Technology sector down 1.58% on the same day [0], and contrasts sharply with growing institutional skepticism toward AI valuations.

The timing of Fukuda’s announcement is particularly significant given current market conditions. On November 6, 2025, major indices experienced substantial declines, with the S&P 500 falling 0.99% to 6,720.32 and NASDAQ dropping 1.74% to 23,053.99 [0]. NVIDIA (NVDA), the flagship AI stock, closed at $188.08 on November 7, down 3.65% from the previous session, with a market capitalization of $4.58 trillion [0]. This decline follows NVIDIA’s brief achievement of a $5 trillion market valuation in October 2025 [4], suggesting peak valuation concerns.

Fukuda’s characterization of the AI market as “just entering its second act” [1][2] represents a contrarian view amid growing market anxiety about AI stock valuations. The Technology sector’s underperformance [0] and semiconductor stocks’ recent $500 billion market value erosion [3] provide context for the market’s current risk-off sentiment toward AI investments.

The analysis reveals a significant divergence between regional market perspectives and global market realities:

: Fukuda’s position as head of Japan’s largest tech fund suggests his views may reflect Japanese market conditions and company valuations, which could differ substantially from U.S. AI giants’ metrics. The statement appears to be based on confidence in continued AI growth potential and the fund’s extensive research capabilities.

: Contrasting views from prominent market participants indicate growing concern. Michael Burry, the “Big Short” investor, disclosed puts on NVIDIA and Palantir, effectively betting $1.1 billion against AI stocks [5]. This institutional skepticism is compounded by valuation concerns, with NVIDIA trading at a P/E ratio of 53.58 [0], significantly above historical averages.

The AI sector faces substantial concentration risks that Fukuda’s statement does not address. NVIDIA alone represents approximately 8% of the entire S&P 500 index [3], while seven large tech companies now account for more than one-third of the S&P 500’s weighting [2]. This concentration creates systemic risk, as any significant correction in AI stocks could disproportionately impact broader market indices.

AI-related capital expenditures accounted for 1.1% of GDP growth in the first half of 2025 [3], indicating the sector’s economic significance. However, many AI companies are not expecting profitability until 2029 [3], suggesting an extended period of speculative investment that could be vulnerable to changing market conditions.

The most significant insight from this analysis is the apparent divergence between Japanese and U.S. market perspectives on AI valuations. Fukuda’s optimistic view may reflect Japanese market conditions, where AI company valuations and growth prospects could differ substantially from their U.S. counterparts. This regional divergence creates complexity for global investors assessing AI sector opportunities.

Fukuda’s “second act” narrative [1][2] conflicts with current market technical indicators and valuation metrics. The Technology sector’s recent underperformance [0], combined with semiconductor stock volatility [3], suggests market participants are increasingly questioning AI valuations. The narrative may represent institutional positioning rather than objective market assessment.

The contrasting positions between Nomura Asset Management and prominent skeptics like Michael Burry [5] highlight a significant institutional conflict. This divergence in professional opinion among sophisticated market participants suggests the AI sector is at a critical juncture, with substantial disagreement about fair valuation levels.

The analysis reveals several strong risk indicators that warrant careful consideration:

1. Market Concentration Risk
   : The dominance of a few AI companies, particularly NVIDIA representing 8% of the S&P 500 [3], creates significant systemic risk for broader market stability.

2. Valuation Extremes
   : NVIDIA’s P/E ratio of 53.58 [0] and many AI companies’ delayed profitability timelines until 2029 [3] suggest stretched valuations vulnerable to corrections.

3. Institutional Skepticism
   : Michael Burry’s $1.1 billion short position against AI stocks [5] signals professional concern from a historically successful contrarian investor.

4. Technical Weakness
   : Recent sector underperformance [0] and semiconductor volatility [3] indicate deteriorating market technical conditions.

Despite these risks, several factors warrant ongoing monitoring:

1. Earnings Validation
   : Actual revenue and profit growth versus AI company projections could validate or contradict current valuations.

2. Capital Expenditure Sustainability
   : Continued corporate AI spending at current elevated levels would support growth narratives.

3. Regional Performance Differences
   : Japanese AI companies may offer different risk-reward profiles compared to U.S. counterparts.

4. Technological Breakthroughs
   : New AI developments could justify current valuations through enhanced growth prospects.

The statement from Japan’s largest tech fund provides an optimistic perspective on AI stocks’ future prospects, suggesting the sector is entering its “second act” rather than experiencing bubble conditions [1][2]. However, this view emerges during significant market volatility, with the Technology sector declining 1.58% [0] and major AI stocks facing valuation pressures.

The market presents a complex risk-reward scenario, with extreme valuations (NVIDIA P/E of 53.58 [0]), market concentration risks (NVIDIA representing 8% of S&P 500 [3]), and growing institutional skepticism [5] conflicting with optimistic growth narratives. Decision-makers should consider regional market differences and maintain disciplined risk management approaches when evaluating AI sector exposure.

The divergence between Japanese market optimism and global market skepticism suggests investors should carefully assess geographic exposure and valuation metrics within the AI sector, rather than treating AI stocks as a homogeneous investment category.