Embattled Switch 2 maker Nintendo enjoyed its biggest stock gain in two months on Tuesday as concerns about overvaluation in the AI sector sent investors on the hunt for bargains elsewhere.

Nintendo shares climbed as much as 6.8% in Tokyo to mark a third straight day of gains ¡ª their longest winning streak since mid-March. The advance is part of a broad rally in Japanese video game stocks that saw Bandai Namco Holdings and Konami Group rise more than 9% on Tuesday.

The revival in Japanese gaming shares comes after months of headwinds brought on by a memory chips supply crunch and worries it will hit hardware sales. Led by Nintendo¡¯s portfolio of beloved game characters and franchises, Japan is home to a wealth of highly valued intellectual property assets, content that companies are increasingly looking to leverage across genres and formats of entertainment. Nintendo rival Sony Group has recently shifted its focus to IP, including publishing rights for music and film.

¡°This is all part of the rotation out of AI tech and into beaten-up names,¡± said Amir Anvarzadeh, Japan equity strategist at Asymmetric Advisors. Tuesday¡¯s moves ¡°underline the growing caution about the market ¡ª massive gains in AI tech which cannot be sustainable.¡±

Stocks that have been considered AI losers ¡ª including Nintendo, which recently marked its longest monthly losing streak in 10 years ¡ª and software makers, which risk losing their market share to AI models, are now benefiting as investors retreat from pricier tech shares like chipmakers, Anvarzadeh said.

Japan¡¯s tech-heavy Nikkei 225 has gained around 20% so far this year, outrunning the S&P 500, on expectations that booming demand from AI hyperscalers will benefit the nation¡¯s chip gear manufacturers. AI-linked stocks like memory chipmaker Kioxia Holdings and cable maker Fujikura have helped drive the rally.

Caution around tech stocks is amplified this week ahead of Nvidia¡¯s earnings, scheduled for Wednesday in the U.S., said Tomo Kinoshita, global market strategist at Invesco Asset Management Japan. ¡°Nvidia often fails to live up to the market¡¯s sky-high expectations, and AI stocks can suffer as a result,¡± he said. ¡°I expect many investors are temporarily selling AI stocks in preparation, which is driving the rotation.¡±

While Tuesday¡¯s rotation is enough to drive Nintendo¡¯s struggling stock up by ¡°a decent clip,¡± it¡¯s unlikely to trigger a fundamental reevaluation of the shares, warned Anvarzadeh. Worries about costlier memory and an underwhelming upcoming game pipeline still weigh on the company¡¯s outlook.

Nintendo¡¯s shares have fallen more than 28% so far in 2026 and currently trade around ?7,600.