As 2026 begins, Asian technology stocks are demonstrating robust performance, with gains significantly outpacing their US counterparts. Global investors are betting that the region's pivotal role in the semiconductor supply chain and its attractive valuation advantages will sustain this outperformance throughout the year. According to Bloomberg data, key Asian tech gauges have climbed approximately 6% year-to-date, far exceeding the Nasdaq 100 Index's 2% gain, as investors rotate from the highly-valued US market toward Asian markets. This shift in capital flows reflects growing skepticism about the ability of US tech stocks to maintain their AI-driven rally after years of substantial advances. Strong fundamentals are reinforcing this trend. Samsung's preliminary operating profit, announced last week, more than tripled to a record high, while Taiwan Semiconductor Manufacturing's revenue also surpassed expectations. Furthermore, the stellar market debut of a Chinese artificial intelligence company has further buoyed market optimism. Major financial institutions hold a positive outlook on the Asian market's prospects. Goldman Sachs strategists currently maintain an overweight rating on the sector, believing that a surge in AI-related demand and reasonable valuations will propel stock prices higher. Citigroup also noted that global long-term investors are consistently increasing their holdings of related stocks, given the importance of Asian tech shares in the semiconductor supply chain and their potential for earnings growth. The current market trend is primarily attributed to a shift in investors' risk-reward preferences. Dilin Wu, a research strategist at Pepperstone Group Ltd., stated that US tech stocks are like a "mature gold mine," with value already high; whereas Asian tech stocks resemble an "underexplored mine," undervalued yet fundamentally strong, ready to reward attentive investors. Valuation data supports this view. The MSCI Asia Pacific Information Technology Index currently trades at a forward price-to-earnings ratio of 16.3 times, compared to P/E ratios of approximately 25 times for both the Nasdaq 100 Index and the Philadelphia Semiconductor Index. This valuation gap persists even though the Asian tech index has outperformed the Nasdaq index by 33 percentage points since late 2024. Fund managers of various types are flocking to Asian tech stocks as part of their 2026 portfolio allocations. George Molina, head of trading at Templeton Global Investments, pointed out that a mix of demand from hedge funds, long-only funds, and passive funds is flowing into South Korean and Hong Kong markets. In the Japanese market, he also observes investors who reduced their AI exposure at year-end are now rebuilding their positions. Beyond valuation advantages, greater earnings growth potential is another key driver of the bullish sentiment. According to data compiled by Bloomberg, companies listed in South Korea and Taiwan—the two markets with the heaviest tech weightings in Asia—are projected to see earnings per share growth of 79% and 36%, respectively, over the next 12 months. In contrast, the expected growth rate for companies listed on the Nasdaq is only 28%. This growth potential is already directly reflected in stock prices. Taiwan Semiconductor Manufacturing, Samsung, and its South Korean peer SK Hynix—the three largest Asian tech stocks—have seen year-to-date gains ranging between 8% and 16%. Hua Hong Semiconductor's stock price has surged more than 20%. With Samsung posting strong preliminary results, benefiting from rising memory chip prices, market attention this week turns to Taiwan Semiconductor Manufacturing's full-year earnings report. Based on expectations for improved profitability, about six brokerages have raised their target price for the stock since the start of the year. Simultaneously, the Chinese market represents a crucial component of investing in Asian tech stocks. Enthusiasm for China's technological prowess continues to run high at the start of the new year, fueled by DeepSeek's publication of a paper on more efficient AI development methods and Kuaishou's video-editing AI model gaining global popularity. According to Bloomberg data, the earnings growth for an index of Chinese tech giants is expected to reach a significant inflection point in 2026, projected to surpass that of the US "Magnificent Seven" for the first time since 2022. Furthermore, supported by this optimistic sentiment, the pipeline of AI-related companies seeking listings in Hong Kong and mainland China is growing. Just last week, two companies, Minimax and Zhipu AI, went public. "Artificial intelligence is a multi-year global growth driver, and North Asia's technology ecosystem—encompassing hardware, software, and infrastructure—positions the region at the forefront of this trend," said Gary Tan, a portfolio manager at Allspring Global Investments. Currently, concerns are mounting over the massive commitments by large tech companies to invest hundreds of billions of dollars in AI infrastructure. According to data compiled by Bloomberg, capital expenditure by Microsoft, Google, Amazon, and Meta is forecast to grow 34% next year, reaching approximately $440 billion. This scale of investment is also sparking debate about whether the AI boom could evolve into a bubble.
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