The artificial intelligence boom has triggered a seismic reshuffling of global equity markets, with Taiwan and South Korea muscling past European nations one by one.
With its stock market now valued at nearly $4.3 trillion, Taiwan surpassed the United Kingdom, Europe’s biggest market, earlier this month, according to data compiled by Bloomberg. South Korea is about $140 billion away from doing the same. The tech-heavy Asian markets have shot past Germany and France in the past seven months.
The shift is largely down to massive gains in shares of three companies that provide essential hardware for AI: Taiwan Semiconductor Manufacturing Co., the world’s largest chip foundry, and South Korea’s leading memory makers Samsung Electronics Co. and SK Hynix Inc. European stock markets, meanwhile, are more heavily weighted toward financial firms.
“The rapid rise of Korea and Taiwan has been due to the long-term megatrend of semiconductors as ‘the new oil’ — the key input to economic activity — combined with the latest price-insensitive boom in AI investment,” said Ian Samson, a portfolio manager at Fidelity International. It demonstrates “the oligopolistic nature of leading-edge semiconductor manufacturing.”
Asia has cemented its central place in the world’s economy as AI develops and spreads, even amid concerns over the impact of tariffs and the Iran war. Taiwan’s March export orders surged at the fastest pace in 16 years, while South Korea’s exports rose more than 40% for a second-straight month, both fueled by robust chip shipments.
Investors have become more cognizant of this role, with TSMC, Samsung and SK Hynix known as key suppliers to AI kingpin Nvidia Corp. TSMC shares have climbed more than 40% this year while the Korean duo have surged more than 80% each.
TSMC now ranks among the largest companies in the world, with its market capitalization of $1.8 trillion, and the Korean pair combined at $1.5 trillion. Europe’s largest company, chip-equipment maker ASML Holding NV, is smaller than all of them. In fact, the combined market cap of all technology stocks in the Stoxx Europe 600 Index stands at about $1.4 trillion.
“This trend can broadly be viewed as a divergence between technology and non-technology sectors,” said Eva Lee, head of Greater China equities at UBS Global Wealth Management. “While individual AI-related stocks in Europe have also delivered strong gains year-to-date, the impact is more pronounced in Korea and Taiwan due to the higher concentration of technology stocks.”
While equity values have soared for the Asian chip powerhouses, their economies remain much smaller than Europe’s largest nations’. The International Monetary Fund estimates South Korea’s gross domestic product at $1.9 trillion this year and Taiwan’s at $977 billion, well below the $3 trillion-plus forecasts for Germany, the UK and France.
To be sure, some investors have sounded caution about the outsized influence of tech stocks in Asia’s markets, given their high weightings in local indexes. Samsung and SK Hynix account for a combined 42% of Korea’s Kospi equity benchmark while TSMC makes up a similar proportion of Taiwan’s Taiex on its own.
AI investment is broadening, however, as the technology’s increasing integration into people’s everyday lives expands demand for all sorts of hardware and applications. TSMC’s index weighting has actually come down from recent highs as stocks like MediaTek Inc. and Delta Electronics Inc. gain share.
“The AI story in Asia may seem narrow at the index level but is broader across the supply chain,” said Francesco Chan, an emerging markets and Asia Pacific investment specialist at JPMorgan Asset Management. “While the largest companies are getting bigger, the opportunity set is also expanding as AI capex continues to trickle down.”
Having passed the UK, Taiwan’s market value is now closing in on that of Canada, which has been expanding on gains in gold and other resource-related stocks. A little further up the rankings is India, whose equities have been slumping on higher energy prices as well as weakness in its banking and IT sectors.
For now, Europe is losing its foothold on the leaderboard due to its relative lack of tech stocks.
“Europe’s heavier tilt toward mature sectors has led to a slower trajectory in market capitalization growth,” said Yi Ping Liao, a portfolio manager at Franklin Templeton. “Korea and Taiwan — and broader North Asia — have built durable advantages in innovation, talent, and manufacturing scale, particularly in key growth sectors, continuing to attract global capital.”
Beyond institutional funds, the hard-charging Asian stock markets are also enjoying greater support from retail investors lured by the AI stock boom. South Korea is seeing a resurgence of loyal mom-and-pop traders known as “ants” for their tendency to act in unison, while there’s also been an upswing in retail participation in Taiwan.
“We are seeing domestic investors playing an increasingly important role” across Asia, said Vikas Pershad, an Asia equities portfolio manager at M&G Investments. Pershad added that he sees the market cap gains in Taiwan and South Korea as “justified” on a long-term view.
With assistance from Michael Msika and Denny Thomas.
This article was generated from an automated news agency feed without modifications to text.
