Tokyo Electron, a chipmaking equipment manufacturer, has achieved a significant milestone by becoming Japan's third-most valuable company in terms of market capitalization. This achievement has been attributed to the heightened interest in Nvidia and artificial intelligence within the semiconductor industry. The company's market cap closed at 17.25 trillion yen ($114.6 billion), with its share price increasing by 6%, closing at 36,580 yen. Tokyo Electron's stock has experienced a remarkable 45% gain so far this year, positioning it as the third most valuable company in Japan, trailing only Toyota Motor and Mitsubishi UFJ Financial Group. This surpasses other prominent companies such as Keyence, Sony, and Nippon Telegraph and Telephone. The success of Tokyo Electron has notably contributed to the rise of the Nikkei Stock Average by approximately 1,100 points since January, accounting for a fifth of the index's overall increase.
As Japan's largest maker of semiconductor-manufacturing equipment and the fourth largest globally in sales, Tokyo Electron holds the 12th position among semiconductor-related companies worldwide in terms of market cap. Despite projecting a net profit decline for the fiscal year ending March 31, the market anticipates its earnings will experience growth due to factors such as semiconductor inventory corrections and robust demand from China. Market analysts forecast a net profit of around 430 billion yen in the year ending March 2025 and approximately 560 billion yen the following year, representing upgrades of 10% since the beginning of the year.
The AI server-related business is anticipated to act as a growth driver, and investments in advanced DRAM memory are expected to lead the recovery of the chipmaking equipment market. Tokyo Electron's unique technology advancements, including new technology for enhancing the performance of advanced 3D NAND flash memory, are projected to generate an additional 300 billion yen in revenue by around 2027 through an expansion of market share in equipment handling that process.
Tokyo Electron's remarkable gains this year have been influenced by supply-demand dynamics and an inflow of funds targeting generative AI-related fields into the semiconductor equipment stocks in Japan. The company's continued success is evidenced by its projected tripling of sales from fiscal 2013, with operating profit expected to be 14 times that of a decade earlier, and market cap 16.6 times more than a decade ago. With ambitious plans for the future, including significantly increased capital spending and research and development allocation, as well as an intention to hire 10,000 new employees globally over the next five years, Tokyo Electron's market forecasts indicate a price-earnings ratio approaching 40 for the year ending March 2025. Despite this projection, industry analysts do not consider the company to be strongly overvalued compared to its peers, as it continues to focus on improving prices and profit margins, contributing to its sustained earning power and potential for further growth.
