Asian chip stocks experienced a mixed performance, with some seeing gains due to renewed optimism from Alphabet Inc.'s substantial artificial intelligence spending plans. Alphabet expects capital spending to reach as much as $205 billion in 2026, significantly exceeding previous guidance and Wall Street expectations, to meet escalating AI demand. This led to a rise in companies like SK Hynix Inc., which saw its shares climb as much as 6.5% in Seoul, fueled by its more than 7% sales contribution from Alphabet. Taiwanese chip designer MediaTek Inc. also gained, reportedly due to its work on custom processors for Alphabet.
However, other Asian equities, especially in Taiwan and South Korea, faced a downturn driven by a chip-stock selloff. The MSCI EM Asia equities index slumped as much as 2.3%, with Taiwanese stocks, which constitute nearly 33% of the index, dropping almost 6% to a five-week low. Taiwan Semiconductor Manufacturing Co. (TSMC), a major supplier for Nvidia and Apple, lost over 5% despite reporting record quarterly profits. Analysts like Billy Leung from Global X ETFs Australia noted that even strong results could trigger profit-taking when positioning is crowded and the upside surprise isn't enough.
Investors are increasingly scrutinizing chipmakers' ability to monetize AI investments, focusing on higher capital expenditure and overseas expansion costs rather than just record profits. Glenn Yin, director of research at ACCM, emphasized that beating expectations is insufficient unless guidance also justifies these investments. For instance, the semiconductor-heavy South Korean benchmark KOSPI ended a turbulent week nearly 9% in the red, with sharp swings in memory chipmakers. Singaporean equities also fell as much as 0.8%.
Despite the sell-off in some regions, the AI trade remains dominant as long as oil prices stay below approximately $90 per barrel, seen as a growth signal that doesn't materially raise core inflation expectations, according to Wei Li, Head of Multi-Asset Investments at BNP Paribas Securities (China). However, between $90 and $100 per barrel, higher oil-driven input costs could begin to compress tech multiples. Overall, the increase in capital expenditure by hyperscalers is viewed by some as an acceleration of the AI build-out, funneling investment into Asian order books, according to Josh Gilbert, Etoro APAC & Mideast lead analyst.
