Asia leads in global AI race, stocks start 2026 on a strong note

Asian technology stocks started 2026 with a bang, and investors are betting that their momentum and outperformance against their U.S. peers will continue throughout the year.

Goldman Sachs strategists are overweight and expect further upside, driven in part by surging demand for artificial intelligence (AI) and reasonable valuations. Citigroup said long-term global investors are piling into Asian tech stocks given their importance in the semiconductor supply chain and potential for earnings upside.

The main Asian tech index has risen about 6% so far this year, outpacing the Nasdaq 100's 2% rise as investors head to the region, which is at the heart of the global semiconductor supply chain. The shift reflects growing skepticism about whether U.S. tech companies can sustain their AI-driven rally after years of strong profits.

Strong fundamentals are reinforcing this move. Samsung's preliminary operating profit more than tripled last week, a record high, and Taiwan Semiconductor Manufacturing Co.'s sales also exceeded expectations. The bright debut of Chinese AI companies on the stock market also adds to the optimism.

“This comes down to a shift in where investors see the best risk-reward at the moment,” said Dilin Wu, research strategist at Pepperstone Group in Australia. “US technology is like a mature gold mine, already rich in value. Asian technology, on the other hand, is like an untapped mine, still undervalued, but fundamentally powerful and ready to reward those who realize it.”

The MSCI Asia Pacific Information Technology Index trades at a forward price/earnings ratio of 16.3. By comparison, the Nasdaq 100 Index and the Philadelphia Stock Exchange Semiconductor Index are about 25 times larger. This is despite the fact that the Asian index has outperformed the Nasdaq index by 33 percentage points since the end of 2024 and has outperformed the Philadelphia index by about 2 percentage points.

Various asset management companies are focusing on high-tech investments in Asia as they set up their portfolios for 2026. George Molina, head of trading at Templeton Global Investments, said there is a mix of hedge funds, long-only and passive demand in this group, particularly in South Korea and Hong Kong. In Japan, he sees investors adding additional capital after reducing their exposure to AI by the end of the year.

This trend is pushing up stock prices. TSMC, Samsung and its South Korean peer SK Hynix, three of Asia's biggest tech stocks, are up 8% to 16% already this year. In Hong Kong, the stock price of semiconductor maker Huahong Semiconductor has increased by more than 20%.

Earning potential

Another key reason behind the bullishness is higher earnings growth potential. Combined earnings per share of companies included in stock benchmarks in South Korea and Taiwan, two Asian tech markets, are expected to rise 79% and 36%, respectively, over the next 12 months, according to data compiled by Bloomberg. This contrasts with the expected 28% growth rate for Nasdaq companies.

Samsung's interim financial results, which were boosted by soaring memory prices, are over for the time being, and this week's attention will turn to TSMC's full-year results. Approximately six securities companies have already raised their stock price targets since the beginning of the year due to expectations for improved profits.

Amid this positive sentiment, Bei Sanh Ling, managing director of Singapore's Union Bancare Prive, said the main risks for Asian semiconductor manufacturers are the reduction in AI spending, particularly in Taiwan, and geopolitics.

Concerns are growing over the hundreds of billions of dollars Big Tech companies have pledged to spend on AI infrastructure. Capital spending from Microsoft, Alphabet, Amazon.com and Metaplatform is expected to rise 34% to about $440 billion next year, according to data compiled by Bloomberg.

chinese technology

Meanwhile, China is another important factor in Asia's technology investments.

With DeepSeek's paper outlining a more efficient approach to AI development, the growing global popularity of Kuaishou Technology's video editing AI model, and the Chinese government's commitment to self-sufficiency, enthusiasm for the country's technological capabilities will only continue to grow in the new year.

China's tech giants' revenue growth is expected to reach a major turning point in 2026, overtaking the Magnificent Seven (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla) for the first time since 2022, according to Bloomberg Intelligence.

This positive trend is also supported by a growing pipeline of AI-related companies aiming to list in Hong Kong and mainland China. In the last week alone, two companies seen as challengers to global sector leaders, including OpenAI, went public.

Gary Tan, portfolio manager at Allspring Global Investments in Singapore, said: “AI has been a driver of global growth for years, and North Asia's technology ecosystem across hardware, software and infrastructure positions the region at the forefront of this trend.” bloomberg