Nomura Core Equity Fund: Q4 2025 Buys, Sells, And Standouts

90% of Nomura Core Equity Fund Institutional Class's 4Q25 underperformance versus the S&P 500 was driven by stock selection, with the weakest picks in consumer discretionary, financials, and communication services. Applied Materials rallied after positive revisions to 2026–2027 semiconductor capital spending plans driven by surging AI chip demand, supporting upside for semiconductors even as the fund lagged overall. Fund commentary is informative for positioning but represents fund-specific underperformance rather than a broad market shift.

Analysis

A step-change in AI-driven wafer fab spending creates a long, lumpy demand tail for capital equipment and consumables that plays out over 12–36 months. Expect lead times to extend and order books to shift from spot to multi-year backlog, which benefits vendors with modular product cycles and strong service/installation franchises — not just lithography but metrology, deposition and specialty materials. This elongation compresses visibility for customers and increases bargaining power for suppliers that can guarantee throughput, driving margin expansion for those vendors while pressuring low-service OEMs.

Second-order winners include specialty-chemicals and substrate suppliers (pricing power as fabs scale), OSATs capturing more complex packaging work, and design-automation vendors that monetize higher node complexity; second-order losers are used-equipment brokers and suppliers focused on mature-node tooling where new logic capacity absorbs the bulk of incremental capex. Geopolitics and export controls remain an outsized risk: if access to advanced lithography is constrained, demand reallocates up- or down-stream and can rapidly reshuffle winners across regions and tech stacks. Inventory digestion is the main cyclic reversal — if hyperscalers pause capacity buildouts, order deferrals could crater forward revenue for 2–4 quarters.

Time arbitrage matters: hardware spend announcements are fast (weeks) but capacity comes online slowly (6–24 months), so trade structures should prefer convex, multi-quarter exposures. The consensus view prices in a clean, steady ramp; the underappreciated scenario is an uneven, region-specific build where vendors with diversified end-markets and aftermarket-installed base materially outperform peers that sell single-product lines into a handful of large customers.

Key Decisions for Investors

• Long AMAT (AMAT) via 12–18 month call spread: buy 18-month ATM calls, sell 25% OTM calls to finance cost. R/R: asymmetric upside if multi-year fab spend sustains; capped at sold strike. Size: 2–4% notional.
• Pair trade: long KLAC + LRCX (metrology/etch exposure) vs short a mature-node equipment proxy or industrial SME (use sell of XME/used-eq ETF exposure if available) to isolate leading-edge capex upside. Timeframe: 6–18 months. R/R: captures order-book rerating while hedging broad cyclical risk.
• Relative value: buy Entegris (ENTG) or Sumco (substrates) vs short a consumer discretionary ETF (XLY) — rationale: capture materials pricing tail as fabs scale while hedging macro softening. Timeframe: 9–24 months. Target: 20–30% gross return with drawdown protection from the short hedge.
• Options hedge for cyclic reversal: buy 6–9 month puts on AMAT-sized position or purchase inexpensive VIX-protection if indications of order deferrals appear (missed guidance, pause from top-3 hyperscalers). Use alerts on fab-capex announcements and hyperscaler commentary to trim/hedge within 1–4 weeks of signals.