AI Demand Supports Taiwan Stocks as Financial Institutions Stay Bullish on Asian Markets

International political and economic conditions have been volatile and difficult to predict this year, with the conflict in the Middle East repeatedly affecting market sentiment. Even so, continued demand for artificial intelligence has led financial institutions to remain broadly optimistic about Taiwan’s medium- to long-term economic outlook. Taiwan stocks have also shown relative resilience during market turbulence. After recent corrections, the market may still have room to rise as long as corporate earnings remain positive. Kevin Liu, head of investment strategy at Standard Chartered Bank Taiwan’s wealth management division, said global financial markets have faced high uncertainty since the United States launched military strikes against Iran on February 28. However, most stock markets rebounded after testing their annual moving averages during the correction. In Asia, markets including Japan, South Korea and Taiwan consolidated near their quarterly moving averages before moving higher, indicating that financial markets had not entered a state of excessive panic. Taiwan’s weighted stock index has fluctuated sharply since early March, affected by oil price volatility triggered by the Middle East conflict and concerns over high inflation. Sector rotation was rapid, and the index briefly retested its quarterly moving average amid negative international developments, but buying support remained evident. After U.S. President Donald Trump announced on April 8 that large-scale military action against Iran would be delayed by two weeks, concerns over escalating tensions in the Middle East eased and capital quickly flowed back into equities. Taiwan’s weighted index at one point surged 1,531.56 points in a single day, marking the second-largest closing point gain in its history. Liu said changes in the Middle East conflict would continue to disrupt market sentiment in the short term, but the impact on the global economy is not expected to expand further. As U.S. companies began releasing first-quarter earnings in April, strong profit expectations are likely to support a subsequent stock market recovery. Once tensions in the Middle East cool, previously pressured technology stocks may rebound. In addition to U.S. equities, Standard Chartered’s chief investment office is also relatively positive on Asian stocks. Although the recent surge in oil prices has affected import costs in Asia, if the rise proves short-lived, pullbacks in Indian and Chinese equities could provide attractive entry points. Meanwhile, supported by earnings growth driven by the semiconductor industry, Standard Chartered has upgraded its rating on Taiwan stocks to “overweight.” The research team at Taiwan Cooperative Securities Investment Consulting estimates that, given continued uncertainty in international politics and economics, Taiwan’s weighted index may trade between 29,100 and 38,500 points this year. The forecast is based on three conditions: continued capital expenditure expansion by global cloud AI computing giants, smooth order deliveries across the global server supply chain, and controllable costs for high-end memory without major price increases. However, Taiwan Cooperative Financial Holding chief economist Hsu Chien-ting cautioned that data centers, power infrastructure and semiconductors are forming a new capital expenditure cycle. This is an important growth driver, but it also means resource allocation and industry concentration are rising at the same time. When capital, policy and market themes all concentrate in one direction, investors must watch for when imbalances in resource allocation reach a critical point. Hsu said the biggest risk facing the global economy this year remains AI. Whether U.S. cloud service providers can sustain their capital spending will be a key factor shaping the economic outlook, creating a situation in which AI can be both the source of success and failure. Other risks include policy and geopolitical uncertainty, such as changes in U.S. tariff policy and whether tariff increases could trigger tail risks, as well as the impact of non-economic factors on financial market sentiment and the influence of energy prices on inflation and central bank decisions. Yuanta Investment Consulting chairman Chiang Hao-nung said South Korea was the strongest performer among 51 major global stock markets last year. Its outperformance was driven by factors including a change in government, alignment between the legislature and executive branch, the wave of AI-related business opportunities and market reform measures. Japan’s stock market, meanwhile, has benefited from structural reforms promoted by the Tokyo Stock Exchange in recent years, including encouraging companies to adjust gender representation on boards, continue share buybacks and increase dividends. These reforms are expected to gradually bear fruit this year and next. The research team at SinoPac Financial Holdings said Asian stock markets such as Japan, South Korea and Taiwan have outperformed other markets so far this year, mainly because capital momentum in the United States has recently weakened while these economies benefit from AI-related demand. Japan’s printed circuit boards and passive components, South Korea’s memory chips, and Taiwan’s semiconductors and AI components are among the main reasons these markets have risen more strongly than others. SinoPac’s research team said the medium- to long-term trend driven by AI demand is likely to continue, though short-term risks remain. These include safe-haven flows caused by war-related factors and profit-taking pressure if capital returns to the U.S. market. Outside AI-related technology stocks, investors may watch heavy electrical equipment shares, which also benefit from rising AI-driven electricity demand. In the machine tool sector, Japan’s recovering year-on-year export growth may help boost earnings for related manufacturers.