South Korea's Kospi more than doubled and Taiwan's Taiex surged 59% in the first half, while Hong Kong's Hang Seng Tech Index slumped 19% — a divergence analysts say looks increasingly unsustainable.
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Asia's AI divide deepens as Kospi doubles, Hang Seng Tech drops 19%
South Korea's Kospi more than doubled and Taiwan's Taiex surged 59% in the first half, while Hong Kong's Hang Seng Tech Index slumped 19% — a divergence analysts say looks increasingly unsustainable.
Asia's AI trade carved markets into winners and losers in the first half, with South Korea's Kospi more than doubling while Hong Kong's Hang Seng Tech Index slid 19%.
"Market performance has increasingly depended on whether a market sits close to the AI supply chain," said Charu Chanana, chief investment strategist at Saxo.
Taiwan's Taiex jumped 59% and Japan's Nikkei 225 rose 39%, driven by demand for components that power artificial intelligence. In China, the ChiNext Index gained 36% while the Shanghai Composite edged up just 3.2%. The divergence reflects a market where only a handful of stocks — memory makers Samsung Electronics and SK Hynix, plus contract chip manufacturer Taiwan Semiconductor Manufacturing Co. — are driving the bulk of gains. Samsung and SK Hynix together account for roughly half of the Kospi's total weighting, meaning a sharp move in either name drags the entire index, said Zavier Wong at eToro.
But cracks are appearing in the AI trade as investors demand proof that huge sums poured into artificial intelligence will yield actual profits. The concentration risk is fueling concern that investors have put too many eggs into one basket, setting the stage for sharper swings, said Angela Cheng, head of research at CGS International.
Overconcentration in AI Superstars Triggers Volatility
Slumps in shares of Samsung and SK Hynix have triggered several trading halts from South Korean authorities to curb volatility. In Japan, tech conglomerate SoftBank — a proxy for the AI trade — along with Advantest and Kioxia have oscillated sharply as investors weigh the technology's long-term promise against concerns over monetization and valuations.
Even with the volatility, the three indexes posted multiple record highs. The Kospi more than doubled, the Nikkei rose 39% and the Taiex jumped 59%.
Lorraine Tan, director of equity research for Asia at Morningstar, sees the outlook as challenging and probably still volatile. As the tech sector is largely fully valued, investors could rotate into other sectors with more reasonable upside, such as healthcare, Tan said.
Hong Kong Lags as Investors Chase AI Hardware
Hong Kong's Hang Seng Tech Index shed 19% in the first six months, despite a torrent of listings by tech and AI firms. Drawn by record-setting rallies elsewhere, investors have pulled money out of heavyweight Chinese internet stocks listed in the city. A push factor has also come from concerns over AI investments and China's subdued consumption.
Hong Kong's market lacks exposure to AI infrastructure, DBS Group Research analysts said in a note. Although valuations are cheap, DBS expects global investors to remain focused on infrastructure and hardware elsewhere.
Despite the unevenness, analysts still see catch-up opportunities in the region, where AI development is still in its infancy. The first round of AI-led rallies centered on infrastructure names. The next leg could be about finding "AI efficiency winners" — companies and markets that can help reduce AI costs or broaden adoption, Chanana said.
This article is for informational purposes only and does not constitute investment advice.
