Hey everyone, Hirokichi here.
This week’s Weekly Stock Picks features one stock each from Japan and the U.S.: Disco Corporation (6146) and Nebius Group (NBIS). Both are leading names in the generative AI (AI that creates text, images, and more) boom, but their stock moves this week went in opposite directions. Let’s dig into the earnings and the price action from an investor’s perspective.
Disco (6146) — Record Quarterly Profit on AI Demand, but a Volatile Stock
Disco is a Kyoto-founded maker of precision semiconductor processing equipment, holding a world-leading share in machines that cut and grind silicon wafers, such as dicing saws and grinders.
The stock came into focus after its Q1 FY2027 (April–June 2026) earnings, released on July 23. Demand for high-value-added chips used in generative AI drove revenue up 27.1% year-on-year to ¥114.3 billion, operating profit up 42.2% to ¥49.0 billion, and net profit up 44.0% to ¥34.2 billion. The company also raised its H1 (April–September 2026) forecast to revenue of ¥242.8 billion (+24.8% YoY) and net profit of ¥73.8 billion (+32.0% YoY). Jefferies upgraded the stock to Buy with an ¥80,000 price target, citing generative AI demand as the key earnings driver. The average analyst price target now sits at ¥84,630.
That said, the stock’s price action has been rough. On July 24, shares fell sharply after the Q2 (July–September) guidance came in slightly below market expectations. Then today, August 18, the Nikkei average dropped as U.S. stocks fell overnight (the Dow lost 272 points, the Nasdaq 84 points), oil prices rose, and long-term interest rates climbed — and selling spread across semiconductor-related shares broadly. Disco fell 5.54% to ¥62,260, a steep drop from its 52-week high of ¥91,680.
From an investor’s perspective, the upside is that structural demand for generative AI-related chips remains a strong tailwind, with the company posting record quarterly profits. The caution point (P/E ratio, or the number of times the stock price is above earnings per share) is that Disco trades at around 49x earnings — a valuation that already prices in high growth expectations, making the stock prone to sharp swings whenever quarterly guidance disappoints.
Nebius Group (NBIS) — Stock Soars on Earnings, a Rising Star in AI Cloud
Nebius Group is an AI infrastructure company based in Amsterdam, the Netherlands. It’s a major player in “AI cloud” — providing companies with cloud infrastructure built around large fleets of GPUs (graphics processing units, chips also widely used for AI computation). The company was spun off from Russia’s Yandex in mid-2024, and Nvidia is among its investors.
In its Q2 2026 earnings, released on August 12, Nebius reported revenue of $582.3 million, up 454% year-on-year and above the $570 million analysts had expected. Revenue from its core AI cloud business grew sixfold, and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization — a measure of core operating profitability) swung to a $236 million profit from a $21 million loss a year earlier. Shares surged more than 25% intraday on the news, the stock’s biggest one-day jump since September 2025. Since then, Bank of America raised its price target to $310 and Baird to $340, among a wave of bullish analyst moves. The stock closed at $268.85 on August 17, having pulled back from its 52-week high near $299.86 but still up sharply for the year.
From an investor’s perspective, the upside is that roughly 70% of Q2 deals included customer prepayments, and the company expects over $9 billion in prepayments for full-year 2026 — a sign that cash collection is keeping pace with rapidly growing demand. The caution point is that even as revenue explodes, net income actually fell 82.6% year-on-year, leaving thin profitability, while the company plans $20–25 billion in capital expenditure for 2026. It’s also worth noting that well-known short-seller Michael Burry reportedly took a short position in Nebius shortly after the strong earnings — a reminder to keep an eye on how overheated sentiment might be.
This Week’s Bigger Picture — Diverging Moves in Japan and the U.S.
In Japan on August 18, the Nikkei average fell as overnight U.S. stock losses, rising oil prices, and higher long-term rates weighed on sentiment, with profit-taking hitting semiconductor equipment stocks especially hard. In the U.S., meanwhile, investors kept buying into “neocloud” AI infrastructure names like Nebius and CoreWeave. Even within the same generative AI theme, money flowed in noticeably different directions across the two markets this week.
What to Watch Next
(1) For Disco, the next catalyst is its July–September quarter earnings, due at the end of October — the key question is whether the generative AI demand surge proves durable.
(2) For Nebius, watch for potential upward revisions to full-year guidance and whether cash flow keeps improving in line with its massive capex plans.
(3) In both Japan and the U.S., AI-related stocks now carry high earnings expectations, which means even a slight miss on results or guidance can trigger a sharp drop. Managing position size with that volatility in mind remains as important as ever.
Let’s keep at it, slow and steady. See you next time!
日本語版はこちら → 【今週の注目株】ディスコ×ネビウス
* This article is for informational purposes only and does not recommend any specific investment. Please make investment decisions at your own responsibility.
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