Asian technology stocks are primed to rally by another 15% to 20% this year, driven by surging investor optimism in artificial intelligence, according to analysts at JPMorgan Chase & Co.
The firm cited rising capital expenditure in data centers and continued earnings upgrades in key semiconductor names as the primary tailwinds.
“AI will continue to lead this upcycle on the growth in datacenter capex in 2025 and more confidence in 2026 growth,” analysts including Gokul Hariharan wrote in a report.
“We are not advising any meaningful rotation away from AI stocks in the next three months and would prefer” to stick with the winners.
JPMorgan’s top picks include regional chip giants such as Taiwan Semiconductor Manufacturing Co. (TSMC), SK Hynix Inc., Advantest Corp, and Delta Electronics Inc., all of which are expected to benefit from steady demand and positive earnings revisions over the next year.
AI-related stocks have outpaced broader Asian equity markets this year, as reflected in Bloomberg’s regional semiconductor index, which has risen over 12%.
Robust demand for AI memory chips from global tech majors has kept supply chains busy and investors optimistic, with semiconductor firms emerging as the clearest beneficiaries of the generative AI boom.
SK Hynix rallies on Tuesday; analysts expect strong earnings
SK Hynix shares surged as much as 9.1% on Tuesday, spearheading a broader rally in South Korean chip stocks and lifting the Kospi index ahead of most regional benchmarks, which also saw gains following President Trump’s announcement of a Middle East cease-fire.
The stock is on course to post its sharpest daily gain in more than two months.
SK Hynix, a key South Korean supplier of high-bandwidth memory (HBM) chips for US AI leader Nvidia, is widely expected by analysts to post strong earnings in the coming quarters, fuelled by sustained demand from the global AI boom.
The company is also seen as a prime beneficiary of South Korea’s new AI-focused agenda under President Lee Jae-myung, who has pledged a 100 trillion won (approximately $72.93 billion) investment to transform the country into a global AI leader.
Geopolitical headwinds remain
Meanwhile, SoftBank’s founder Masayoshi Son is reportedly in discussions with TSMC to co-develop a $1 trillion AI and robotics manufacturing hub in Arizona, dubbed “Project Crystal Land.”
Modeled after China’s Shenzhen, the project is envisioned as a sprawling innovation zone for next-generation industrial robots and chips, according to Bloomberg.
Despite the positive sentiment, global chipmakers are facing renewed geopolitical pressures.
Shares of TSMC fell on Monday following a Reuters report that the US Department of Commerce is considering revoking authorizations that allow companies like TSMC, Samsung, and SK Hynix to ship American equipment to their Chinese plants.
Jefferies analysts believe the move may be a bargaining tactic by the Trump administration amid trade negotiations with China.
“The revocation would likely do more harm to these companies than to China,” the analysts wrote, adding that the US still wants major chipmakers to deepen their investments domestically.
Cautious outlook beyond 2025
While near-term forecasts remain upbeat, some analysts warn that the semiconductor cycle may face challenges by 2026.
Morningstar’s Phelix Lee said in a note that the sector is likely entering the early phase of a downcycle.
Concerns include elevated valuations, uncertainty over tariffs, and a potential mismatch between capital spending and long-term demand.
Lee estimates that capital expenditure from major US and Chinese tech firms will exceed $300 billion in 2025—representing a 40% increase year-on-year.
“This sets a high bar for sustaining momentum into 2026,” he noted. As a result, Morningstar recommends investors focus on best-in-class names such as TSMC and GlobalWafers.
Non-AI sectors see limited upside
JPMorgan’s report also urged caution on non-AI-related tech sectors, such as smartphone and PC manufacturers.
These companies may continue to see earnings downgrades amid weak consumer demand and fading impact from China’s consumption subsidies.
As the AI race reshapes the region’s tech landscape, investors are keeping their focus on the key players driving the transformation. While short-term catalysts remain in place, navigating the long-term risks may be crucial for sustained gains.
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