At the beginning of 2026, Asian tech stocks far outperformed the US Nasdaq

At the beginning of 2026, Asian tech stocks performed strongly, significantly outpacing their American counterparts. Global investors are betting on the region's core position in the semiconductor supply chain and its attractive valuation advantages, which are expected to drive this outstanding performance throughout the year.

According to Bloomberg data, as investors rotate from the higher-valued U.S. market to the Asian market, key Asian tech stock indices have risen about 6% this year, far exceeding the Nasdaq 100 index's 2% increase. This shift in capital flow reflects growing skepticism about whether U.S. tech stocks can maintain their AI-driven momentum after several years of significant gains.

Strong fundamentals are reinforcing this trend. Samsung announced last week that its preliminary operating profit more than doubled, reaching a record high, while TSMC's revenue also exceeded expectations. Additionally, the impressive debut performances of Chinese AI companies have further boosted market optimism.

Major financial institutions hold a positive outlook on the Asian market. Goldman Sachs strategists currently maintain an overweight rating on the sector, believing that the surge in AI-related demand and reasonable valuations will drive stock prices higher. Citigroup also pointed out that, given the importance of Asian tech stocks in the semiconductor supply chain and their potential for earnings upside, global long-term investors are continuously increasing their holdings in related stocks.

Valuation Gap Triggers Capital Rotation

The current market trend is primarily attributed to a shift in investors' risk-return preferences. Dilin Wu, a research strategist at Pepperstone Group Ltd., stated that U.S. tech stocks are like a "mature gold mine," with high valuations; whereas Asian tech stocks resemble an "underexplored mine," undervalued but with strong fundamentals, ready to reward investors who pay attention to them.

Valuation data supports this view. The MSCI Asia Pacific Information Technology Index currently has a forward price-to-earnings ratio of 16.3 times, while the Nasdaq 100 Index and the Philadelphia Semiconductor Index have price-to-earnings ratios of approximately 25 times. Even though the Asian tech stock index has outperformed the Nasdaq index by 33 percentage points since the end of 2024, this valuation gap still exists.

Various fund managers are pouring into Asian tech stocks based on their 2026 portfolio allocations. George Molina, head of trading at Templeton Global Investments, noted that the demand from hedge funds, long-only funds, and passive funds is flowing into the South Korean and Hong Kong markets. In the Japanese market, he also observed that investors who reduced their AI exposure at the end of the year are re-adding positions.

Earnings Growth Potential Exceeds U.S. Stocks

In addition to valuation advantages, higher earnings growth potential is another major reason driving bullish sentiment. According to Bloomberg compiled data, as the two largest tech-weighted markets in Asia, South Korean and Taiwanese listed companies are expected to see their earnings per share (EPS) grow by 79% and 36%, respectively, over the next 12 months. In contrast, the expected growth rate for Nasdaq-listed companies is only 28% This growth potential has been directly reflected in stock prices. As the three largest technology stocks in Asia, TSMC, Samsung, and South Korean peer SK Hynix have seen price increases ranging from 8% to 16% this year. Hua Hong Semiconductor's stock price has risen by more than 20%.

With Samsung benefiting from rising memory chip prices and announcing impressive preliminary results, market attention has shifted this week to TSMC's full-year financial report. Based on expectations of improved profitability, about six brokerages have raised their target prices for the stock since the beginning of the year.

The Recovery Momentum of Chinese Tech Stocks

Meanwhile, the Chinese market is also a key part of investing in Asian tech stocks. With DeepSeek publishing papers on more efficient AI development methods and Kuaishou's video editing AI model gaining global popularity, market enthusiasm for China's technological strength has remained high at the start of the new year.

According to Bloomberg data, the earnings growth of the Chinese tech giants index is expected to reach a significant turning point in 2026, and is projected to exceed the U.S. stock market's "seven giants" for the first time since 2022.

Additionally, supported by this optimistic sentiment, the number of AI-related companies seeking to list in Hong Kong and mainland China is steadily increasing. Just last week, two companies, Minimax and Zhipu AI, went public.

Gary Tan, portfolio manager at Allspring Global Investments, stated:

"Artificial intelligence is a multi-year global growth driver, and the technology ecosystem in North Asia, covering hardware, software, and infrastructure, places the region at the forefront of this trend."

Currently, concerns are growing in the market about large tech companies' commitments to invest hundreds of billions of dollars in AI infrastructure. According to compiled data from Bloomberg, capital expenditures by Microsoft, Google, Amazon, and Meta are expected to grow by 34% next year, reaching approximately $440 billion. This massive investment has also sparked discussions about whether the AI boom will evolve into a bubble