Asian technology stocks are likely to remain the region’s main market driver in the third quarter, but investors are becoming increasingly selective as rich valuations, uneven earnings and mounting questions over artificial intelligence spending trigger greater volatility across the sector.
In its latest Asia technology strategy report, Bernstein said semiconductors remain its preferred investment theme, supported by a strong earnings upgrade cycle despite elevated valuations. However, the brokerage urged investors to prioritise companies with sustainable earnings momentum instead of chasing expensive AI-related stocks.
Bernstein continues to favour leading AI infrastructure companies, including Taiwan Semiconductor Manufacturing (TSMC), SK Hynix, Samsung Electronics and MediaTek, arguing that they remain well positioned to benefit from rising global demand for AI chips and supporting infrastructure.
Investor caution was evident in Monday’s trading across Asia. South Korea’s KOSPI index fell by more than 3 per cent, making it the region’s weakest-performing major market, while Japan’s Nikkei 225 declined by more than 1 per cent as heavyweight technology shares came under pressure. In contrast, Taiwan’s benchmark index gained around 1 per cent, while Hong Kong’s Hang Seng Index rose about 0.5 per cent.
The latest market moves extend a volatile period for Asian technology stocks after Samsung Electronics’ preliminary earnings failed to convince investors that profits from memory chips can continue keeping pace with the industry’s massive AI-related capital expenditure.
Investors have also become more cautious after months of strong gains, increasingly questioning whether the billions of dollars that hyperscale cloud providers continue to invest in AI infrastructure will generate sufficient long-term returns.
Despite those concerns, Bernstein expects AI memory chips to remain a major earnings driver in South Korea. The firm said SK Hynix continues to benefit from its leadership in high-bandwidth memory (HBM) chips used in Nvidia’s AI processors, while Samsung Electronics also stands to gain from expanding global investment in AI infrastructure.
Strong investor demand continues to support that view. Last week, Reuters reported that SK Hynix’s US American Depositary Receipt (ADR) offering attracted demand exceeding seven times the number of shares available, highlighting continued investor appetite for leading AI chipmakers.
In Japan, Bernstein remains optimistic about companies linked to Apple’s supply chain, particularly businesses connected to MediaTek’s ecosystem and manufacturers of electronic components used in AI-enabled smartphones and premium consumer electronics.
However, the brokerage maintained its Underperform rating on Kioxia, citing more challenging conditions in the memory chip market.
Bernstein noted that semiconductor companies have outperformed every other technology subsector this year. It added that SK Hynix, Samsung Electronics and TSMC have ranked among Asia’s strongest-performing mega-cap technology stocks, supported by sustained demand for AI processors and high-bandwidth memory products.
Looking across the region, the brokerage continues to favour Taiwan and South Korea’s AI ecosystem. It reiterated Outperform ratings on TSMC, SK Hynix, Samsung Electronics and MediaTek, while adopting a more selective approach in Japan and China by favouring companies with stronger earnings visibility and more attractive valuations.
