‘Mario Kart’ may help Nintendo rally outlast flight from AI tech

TOKYO – Nintendo shares may extend their record climb beyond the upcoming Switch 2 launch on anticipation of new hit games and other content surrounding the console’s release.

The Mario Kart creator’s focus on success in games, while leveraging its intellectual property into movies and theme parks, makes it look like a safe bet for tech investors amid the volatility sparked by Chinese artificial intelligence (AI) start-up DeepSeek, analysts say.

Since the success of The Super Mario Bros Movie in 2023, the market has started “to value Nintendo as a content creator rather than just a hardware manufacturer”, according to JPMorgan Chase & Co analyst Junko Yamamura.

Ms Yamamura expects the stock to continue rising on the company’s “unique” software selling strategy, which includes character merchandise and mobile games.

The stock fell in the wake of the new console announcement two weeks ago on lack of surprise, but has since resumed its rise.

The shares are up about 25 per cent in the past 12 months, more than double the rise in Japan’s benchmark Topix gauge, taking its market value to an all-time high of over US$87 billion (S$118 billion).

While results due on Feb 4 will likely show continued weakness on waning demand for the almost eight-year-old Switch, sales of its successor should help drive a revival from the fiscal year starting April, Ms Yamamura wrote in a report earlier in January.

She started coverage of Nintendo at overweight, and estimates profits will climb to a record high by the fiscal year ending in March 2030.

The company has promised more details on its new console in April, but the launch date is yet to be announced.

While execution risk remains for the hardware, investor optimism is growing on hopes of new blockbuster software titles from Nintendo and third-party developers, as well as other ways to capitalise on the company’s trove of beloved characters. 

“It’s not the Switch 2 itself that’s going to drive earnings,” said Mr Michael Pachter, an analyst at Wedbush Securities. “It’s software sales, Nintendo online subscriptions, movie royalties and the opportunity for theme parks to become something bigger.”

The company is working on a movie based on its hit Legend Of Zelda games and is planning to expand its Mario-themed Universal Studios attractions to parks in Singapore and Orlando. 

Mr Pachter expects Nintendo to release a new multiplayer game, Mario Kart 9, in tandem with the Switch 2, boosting its shares.

Until the console’s official launch, however, the stock may see volatility around leaks on the details, he cautioned.

Indeed, short interest jumped back to 0.9 per cent of the free float as at Jan 29 from less than 0.3 per cent two weeks earlier, S&P Global data showed.

The stock is now looking too expensive, with earnings-based valuation at a seven-year high.

While sales of the Switch 2 may boost earnings, the console may also expose Nintendo to tariff risks.

A high blanket duty on all imports under US President Donald Trump’s administration would hurt the company, said Mr Pachter, who predicts around 40 per cent of Switch 2 sales will be in the US.

But Nintendo’s focus on entertainment content, rather than hardware, provides more shelter from geopolitical tensions compared with some other tech names.

Its shares also saw support amid the recent rout in chip stocks on worries tied to China’s low-cost AI model DeepSeek. 

Companies with strong content offerings are seen as attractive safe havens in tech as the AI boom unfolds, wrote Britain-based analyst Pelham Smithers in a note last week.

“The DeepSeek scare has sent the AI infrastructure story into a tailspin, leading to a rotation back into video game stocks” like Nintendo, which does not rely on high-level chips or data centres, he wrote. BLOOMBERG