Asia's Tech Giants Revitalise Global AI Rally With Record Earnings

A fresh investor frenzy has revitalised the global artificial intelligence bull run, shifting the market's centre of gravity to Asia's technology sector. Major Asian chipmakers—Taiwan Semiconductor Manufacturing Co, Samsung Electronics, and SK Hynix—have reported record earnings, driving South Korea's benchmark KOSPI index to double in value in just over six months. Samsung Electronics recently surpassed a $1 trillion market capitalisation, becoming the second Asian company to do so after Taiwan Semiconductor Manufacturing Co.

The sector's performance is underpinned by a seller's market dynamic where Asian manufacturers hold significant pricing power and secure multi-year agreements with major clients like Nvidia. This contrasts sharply with the heavy capital expenditure risks faced by US-based tech giants. Samsung Electronics' chip revenues leapt nearly 50 times in the last quarter alone, contributing to a first-quarter profit increase of eightfold.

SK Hynix, which was valued at less than $100 billion 16 months ago, is now closing in on an $800 billion valuation. The company has announced a plan to share 10% of its annual operating profit with workers; calculations suggest this could result in an average bonus of $680,000 per employee by 2027. This wealth generation has created a significant spillover effect, powering the economies of both South Korea and Taiwan.

South Korean retail investors, locally known as ants, have engaged in record leveraged buying of KOSPI shares, hitting 25 trillion won in late April. Concurrently, Taiwan's first-quarter GDP jumped 13.69%, marking its biggest rise in nearly four decades, while South Korea recorded its fastest growth rate in six years. Global investors have begun flowing back into South Korean and Taiwanese stocks after withdrawing nearly $50 billion in March, with about $7 billion returning since then.

Global analysts note that Asian suppliers hold a strong position in the AI supply chain due to their capacity and multi-year agreements. Alex Huang, chairman of Fubon Financial Holding's fund arm, described the situation as a seller's market where Nvidia is worried about failing to secure capacity rather than setting product prices. Ian Samson, a multi-asset portfolio manager at Fidelity International, noted that while valuations may be a concern, near-term positioning has cleared up significantly.

Despite the strong momentum, some observers warn of potential risks. Any sign that big AI firms are finding fundraising harder would curtail chipmakers' spending and hurt future earnings. Nevertheless, with many Taiwan companies' production capacities fully booked through 2027, the region remains the epicentre of the AI boom.