Software firm ServiceNow Inc., which specializes in optimizing digital workflows, closed up more than 8% by Monday's market close, bringing its three-day surge to roughly 20%. Its shares rose as much as 4% in pre-market trading on Tuesday. The following day, Nintendo Co., Ltd., the maker of the Switch 2 whose stock has struggled this year, posted its largest single-day gain in two months on the Japanese market. The simultaneous rise in shares of Nintendo and ServiceNow, both previously viewed by the market as potentially "disrupted by AI," stems from growing investor concern over the overall overvaluation of the AI computing infrastructure chain. This is prompting a search for cheaper stocks with solid long-term fundamentals elsewhere. More precisely, Nintendo and ServiceNow resemble "tech/software stocks mispriced due to massive AI spillover costs" rather than typical "big losers being disrupted by AI." To a large extent, they fall into the category of "assets mispriced by the AI wave or AI disruption fears." Nintendo was labeled an "AI loser" by some traders not primarily because its business/model could be directly replaced by AI agents like Anthropic's newly launched Claude Cowork or the open-source OpenClaw. Instead, the concern is that AI data centers are competing for memory chip supply, driving up costs for components like DRAM/NAND, squeezing potential Switch 2 hardware margins, and increasing supply chain uncertainty. Institutionally compiled statistics show AI data center demand caused DRAM/NAND memory chip prices to at least double quarter-over-quarter in Q1, with forecasts of another potential 60% increase this quarter. Nintendo anticipates that memory costs and impacts from tariffs will increase its costs this fiscal year by approximately 100 billion yen. From an AI engineering and industrial logic perspective, the "AI loser" label itself is overly simplistic. What is truly vulnerable to AI disruption is point-solution software lacking workflow stickiness, data moats, system access points, and compliance/audit capabilities. Conversely, platform software capable of embedding AI into core enterprise processes, becoming the layer for Agent orchestration and governance, may actually benefit from AI. ServiceNow likely falls into the latter category. When AI Agents perform tasks within enterprises, they require access to ticketing, customer, permission, knowledge base, approval flow, and log systems. These components do not automatically disappear with stronger models; instead, they become more critical. The Rise of "AI Fatigue" Trades! Nintendo Leads Rally in 'Assets Mispriced by AI Disruption Fears' Nintendo's stock rose as much as 6.8% during Tokyo trading, marking its third consecutive day of gains—its longest winning streak since mid-March. This surge was part of a broad advance in Japanese video game and IP consumer stocks, with Bandai Namco Holdings Inc. and Konami Group Corp. both gaining over 9% on Tuesday. The recovery in Japanese game stocks comes after months of headwinds, previously suppressed by extreme tightness in DRAM/NAND supply driven by the AI infrastructure boom's "super cycle" and market fears of its impact on end-device hardware sales. Japan possesses a wealth of high-value intellectual property assets, represented by Nintendo's beloved game characters and series IP. Companies are increasingly seeking to leverage these popular IPs across different entertainment genres and formats. Sony Group Corp., a competitor and leader in Japan's entertainment and tech industry, has recently shifted its business model focus towards IP, including rights to popular music and film. As shown in the chart, the "AI fatigue" trade has fueled a strong recovery in previously battered Japanese game stocks—global capital rotating out of the overcrowded "AI winner trade" has significantly benefited Nintendo. Note: Standardized to percentage gains since March 31, 2026. Amir Anvarzadeh, a Japan-based equity strategist at Asymmetric Advisors Pte., stated, "This is all part of a rotation out of tech stocks around AI computing infrastructure and into previously 'AI-battered' stocks with solid fundamentals." "Tuesday's move highlights rising market caution—the massive gains in AI tech stocks cannot be sustained indefinitely." Anvarzadeh noted that some stocks previously viewed by some investors as AI losers—including Nintendo, which recently saw its longest monthly losing streak in a decade—and software makers facing risks of market share loss to large AI models, are now benefiting from investor rotation away from higher-priced AI tech stocks like chip giants and optical interconnect leaders. Japan's Nikkei 225 index, with its heavy weighting in tech stocks, has risen about 20% year-to-date, significantly outperforming the S&P 500. The core reason is market expectations that surging demand for AI computing resources from hyperscale cloud providers focused on AI will benefit Japan's top-tier global suppliers of AI data center optical interconnect equipment, semiconductor manufacturing equipment, and storage industry leaders. Related hot stocks in the AI computing chain, such as Japan-based NAND maker Kioxia Holdings Corp. and cable manufacturer Fujikura Ltd., have significantly driven this rally. Tomo Kinoshita, a global market strategist at Invesco Asset Management, said market caution towards tech stocks was amplified this week ahead of Nvidia's latest quarterly earnings report scheduled for Wednesday U.S. time. He stated, "Nvidia's results in recent quarters have struggled to meet the market's extremely high growth expectations, which could put significant pressure on AI-related tech stocks." "I expect many investors are temporarily selling AI tech stocks in preparation for potential pressure, which is driving this rotation into potential AI losers." Anvarzadeh warned that while the recent market rotation is enough to drive a "pretty decent" rally in the beleaguered Nintendo stock, it is unlikely to trigger a fresh round of reassessment of the company's growth expectations. Concerns about rising memory chip costs and a potentially underwhelming upcoming game lineup continue to weigh on its outlook. However, Nintendo's exclusive moat remains concentrated in popular IPs like Mario, Zelda, and Pokémon, its console gaming ecosystem, and first-party game content—areas not easily replaceable by AI large language models in the short term. It is reported that Nintendo's stock has fallen over 28% year-to-date for 2026 and is currently trading around 7,600 yen. Market Begins Hunting for "Cheap Stocks with Solid Fundamentals" The current market focus has indeed partially shifted from AI computing chain leaders to previously shunned "potential AI disruption losers," but this is a cyclical rotation, not a reversal of the AI bull market's main theme. The AI computing industry chain still has the hardcore logic of trillions in AI capital expenditure supporting it. When valuations and positioning become overheated, capital naturally seeks "low-priced, low-crowding, AI-fear-overpriced" assets for a rebound. The recent rebound in Nintendo shares shares a similar logic with the bounce in U.S. software stocks: Software companies like ServiceNow and Salesforce, previously viewed by the market as "potentially disrupted by AI Agents," are seeing repricing after deep valuation cuts. In other words, as the extremely popular AI computing chain leaders face pullbacks due to increasingly crowded positioning, valuations reaching historical highs, and temporary exhaustion of positive earnings catalysts, the market is beginning to hunt for "cheap stocks with solid fundamentals," particularly concentrated in those "assets mispriced by AI disruption fears." ServiceNow rose about 8.8% on Monday and is up roughly 17% since May. Its rebound is partly attributed to Wall Street giant Bank of America resuming coverage with a "Buy" rating. The rationale is that the more AI agents there are, the more enterprises will need process orchestration, permission control, auditing, data governance, and IT service management platforms. In other words, ServiceNow may not be an AI replacement target but could instead be the "control plane" for deploying AI Agents into enterprise processes, hence the $130 price target. However, this rotation is more accurately described as "market positioning rebalancing after overheated AI winner valuations," rather than "AI losers making a complete comeback." Challenges for Japanese game stocks—tight memory chip supply, Switch 2 hardware costs, and whether Nintendo's potential game lineup can exceed expectations—remain. Nintendo is still down over 28% year-to-date for 2026, trading around 7,600 yen, and analysts warn this rebound may not be sufficient to trigger a reassessment of growth prospects. Similarly, differentiation exists within the software sector: While Bank of America is bullish on ServiceNow, it gave Salesforce an "Underperform" rating, citing structural pressures on new SaaS customer growth and AI monetization. Therefore, this "AI fatigue" trade theme more closely resembles a combination of three factors: profit-taking in high-valuation AI computing chain leaders, a rebound in mispriced software/IP assets, and risk asset position reduction ahead of Nvidia's earnings report. Recent pullbacks in AI data center optical interconnect/communication chains like Lumentum and Coherent are partly due to pressure on AI computing infrastructure stocks from rising bond yields, crowded holdings, and reduced positions by prominent Wall Street institutional investors. This indicates the market has not lost faith in AI but is rather reassessing the order of "overcrowded positioning and who has been excessively penalized by AI fears."
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