Japan's Largest Tech Fund Defends AI Stock Valuations Amid Market Volatility

This analysis is based on the Bloomberg report [1] published on November 7, 2025, which covered Yasuyuki Fukuda’s assertion that AI stocks are not in a bubble stage. Fukuda, chief portfolio manager of Nomura Asset Management’s Japanese Information Electronics equity fund (Japan’s largest tech fund), stated that AI stocks are “just entering its second act” [1]. This commentary emerges during a period of significant market volatility and growing concerns about AI stock valuations globally.

The timing of this statement is particularly noteworthy given the concurrent market dynamics. Current market data [0] shows NVIDIA trading at $188.08, down 3.65% on the day with a market cap of $4.58T, while SoftBank Group (9984.T) plunged 6.85% to ¥21,705. The broader technology sector declined 1.58%, reflecting broader market weakness [0]. These movements occurred against the backdrop of the Nasdaq Composite falling 1.74% and the S&P 500 declining 0.99% on November 6, 2025 [0].

Fukuda’s optimistic perspective stands in stark contrast to prevailing market sentiment and institutional warnings. Major investment bank CEOs from Morgan Stanley and Goldman Sachs have recently warned of potential 10-15% market corrections due to “sky-high valuations” [3]. Furthermore, the trader who inspired “The Big Short” has placed a $1.1 billion bet against AI stocks including NVIDIA and Palantir [4], indicating significant institutional skepticism.

The valuation metrics present a complex picture. NVIDIA’s current P/E ratio of 53.58x [0] and its recent market cap reaching $5 trillion before the pullback [4] represent historically high valuation levels. These elevated multiples raise questions about sustainability, particularly when contrasted with the technology sector’s recent underperformance relative to broader markets [0].

The analysis reveals a significant disconnect between experienced fund managers’ long-term perspectives and current market dynamics. While Fukuda’s experience managing Japan’s largest tech fund lends credibility to his fundamental analysis, the market’s immediate reaction suggests investors are prioritizing risk management over long-term growth narratives.

The divergence in institutional views is particularly telling. On one side, established tech fund managers see sustainable growth, while on the other, major investment banks and high-profile short sellers identify bubble characteristics. This institutional disagreement often precedes significant market inflection points.

The global nature of the AI stock concerns is evident, with Asian markets experiencing sharp declines and Japan’s Nikkei falling over 3% in recent sessions [2]. SoftBank’s 22% plunge over two days, erasing approximately $32 billion in market value [5], demonstrates how AI valuation concerns can trigger cascading effects across global markets.

The analysis reveals several strong risk indicators that warrant attention:

1. Valuation Extremes
   : NVIDIA’s P/E ratio of 53.58x and recent $5 trillion market cap represent historically high valuation levels that historically correlate with increased volatility risk [0].

2. Institutional Skepticism
   : Major investment banks (Morgan Stanley, Goldman Sachs) have publicly warned of potential corrections, suggesting professional money managers are positioning defensively [3].

3. High-Profile Shorts
   : Significant institutional betting against AI stocks indicates professional skepticism about near-term price sustainability [4].

4. Momentum Reversal
   : Recent sharp declines in key AI stocks suggest momentum may be shifting, which could accelerate if technical support levels fail [0].

Despite the risks, several factors suggest potential opportunities:

1. Long-Term AI Adoption
   : If Fukuda’s fundamental analysis proves correct, current volatility could present entry points for long-term investors focused on AI adoption cycles.

2. Selective Opportunities
   : Not all AI stocks may be equally overvalued, creating opportunities for selective investment in companies with stronger fundamentals.

3. Market Overreaction
   : The current sell-off may represent overreaction to short-term concerns, potentially creating mispricing opportunities.

The current market environment presents a complex scenario for AI-related investments. While experienced fund managers like Fukuda provide compelling arguments for sustainable AI growth, current market dynamics suggest elevated risk levels. Key monitoring factors include upcoming quarterly results from major AI companies, institutional flow patterns, technical support levels, interest rate environment changes, and real-world AI deployment metrics.

The divergence between fundamental analysis and market sentiment creates uncertainty that requires careful navigation. Decision-makers should consider both perspectives while maintaining appropriate risk management protocols given the current volatility levels and valuation extremes in the AI sector [0][1][3][4].