In the beginning of 2026, Asian technology stocks have far outperformed the US Nasdaq index.

Beginning in 2026, Asian technology stocks have performed strongly, with significant gains surpassing those of their American counterparts. Global investors are betting on the region's core position in the semiconductor supply chain and attractive valuation advantages, which are expected to drive this outstanding performance throughout the year. According to Bloomberg data, key Asian technology stock indices have risen by about 6% since the beginning of the year, far exceeding the 2% increase in the Nasdaq 100 index. This shift in capital flow reflects a growing skepticism about whether US technology stocks can maintain their AI-driven momentum after years of significant gains. Strong fundamentals are reinforcing this trend. Samsung announced a more than double increase in preliminary operating profit last week, reaching a historic high, while Taiwan Semiconductor Manufacturing Co., Ltd.'s revenue also exceeded expectations. In addition, the impressive debut of Chinese AI companies on the market has further heightened market optimism. Major financial institutions are optimistic about the outlook for the Asian markets. Goldman Sachs Group, Inc.'s strategists currently maintain an overweight rating on this sector, believing that the surge in demand for AI-related technologies and reasonable valuations will further drive stock prices upward. Citigroup also points out that global long-term investors are continuing to increase their holdings of Asian technology stocks due to their importance in the semiconductor supply chain and profit potential. Valuation gaps are driving capital rotation The current market trend is mainly attributed to a shift in investor risk-return preferences. Dilin Wu, a research strategist at Pepperstone Group Ltd., describes US technology stocks as a "mature gold mine" with already high value, while Asian technology stocks are likened to an "underexplored mine" - undervalued but with strong fundamentals ready to reward investors paying attention to them. Valuation data supports this view. The current forward price-to-earnings ratio of the MSCI Asia Pacific Information Technology Index is 16.3 times, while the P/E ratios of the Nasdaq 100 index and the Philadelphia Semiconductor Index are approximately 25 times. Despite outperforming the Nasdaq index by 33 percentage points since the end of 2024, there is still a valuation gap for Asian technology stocks. Various fund managers are reallocating their portfolios towards Asian technology stocks for 2026. George Molina, trading head at Templeton Global Investments, notes that demand from hedge funds, long-only funds, and passive funds is flowing into the South Korean and Hong Kong markets. In the Japanese market, he also observes investors who reduced their AI exposure at the end of the year are now increasing their positions again. Profit growth potential surpasses US stocks In addition to valuation advantages, higher profit growth potential is another major driver of bullish sentiment. According to Bloomberg data, South Korean and Taiwanese listed companies, the two largest technology weight markets in Asia, are expected to see EPS growth of 79% and 36% respectively in the next 12 months. In contrast, the expected growth rate for Nasdaq-listed companies is only 28%. This growth potential is directly reflected in stock prices. The shares of the three largest Asian technology stocks - Taiwan Semiconductor Manufacturing Co., Ltd., Samsung, and Korean counterpart SK Hynix - have risen by 8% to 16% since the beginning of the year. The share price of HUA HONG SEMI has increased by over 20%. With Samsung's impressive preliminary report benefiting from the rise in storage chip prices, market attention has now shifted to Taiwan Semiconductor Manufacturing Co., Ltd.'s full-year financial report. Based on expectations of improved profitability, approximately six brokerages have raised their target price for the stock since the beginning of the year. Revival of Chinese technology stocks Meanwhile, the Chinese market is also a key factor in investing in Asian technology stocks. With DeepSeek publishing a paper on more efficient AI development methods and the video editing AI model of Kwai gaining global popularity, the market enthusiasm for China's technological strength continues to rise at the beginning of the new year. According to Bloomberg data, the earnings growth of the Chinese tech giant index is expected to reach a major turning point in 2026, surpassing the "big seven" of US stocks for the first time since 2022. In addition, supported by this optimistic sentiment, the number of AI-related companies seeking IPOs in Hong Kong and mainland China is increasing. Just last week, Minimax and KNOWLEDGE ATLASAI went public. Gary Tan, portfolio manager at Allspring Global Investments, commented, "AI is a multi-year global growth driver, and the North Asian technology ecosystem covering hardware, software, and infrastructure puts the region at the forefront of this trend." Currently, concerns about large technology companies committing to invest billions in AI infrastructure are intensifying. According to Bloomberg data, capital expenditures for Microsoft Corporation, Alphabet Inc. Class C, Amazon.com, Inc., and Meta are expected to increase by 34% next year, reaching approximately $440 billion. This massive investment has also sparked discussions about whether the AI boom will evolve into a bubble. This article was reposted from "Wall Street News" by Zhang Yaqi; edited by Huang Xiaodong.