AI-Fueled Chip Rally Pushes Asian Markets Higher

Asian equities advanced on Thursday as renewed optimism around artificial intelligence demand sparked gains in semiconductors and lifted regional benchmarks. Taiwan Semiconductor (Zorrox: TSM) led the surge in Taipei, while Japan’s Nikkei (Zorrox: JPN225.) also pushed higher as investors rotated into technology and export-driven names. The rebound came despite lingering global macro uncertainty, underscoring AI’s role as the dominant driver of market sentiment.

Tech Momentum Sets the Tone

The latest rally stemmed from a series of AI-related announcements. In Taiwan, TSMC rose on expectations that new generative AI workloads will require fresh rounds of chip production, with suppliers and hardware makers also advancing. In Japan, chipmakers and electronics giants benefitted from renewed demand optimism, while semiconductor exports helped fuel broader equity inflows.

Hong Kong’s market added to the momentum, with large-cap tech names catching a bid. Mainland semiconductor producers also registered sharp gains, extending the rally beyond Taiwan and Japan.

Macro Tailwinds Add Fuel

Beyond AI, global conditions supported risk appetite. Weaker U.S. private payroll data strengthened expectations of Federal Reserve rate cuts, sending capital back into equities worldwide. Asia captured a significant share of the flow, with investors focusing on markets tied to technology and supply-chain growth.

The MSCI Asia ex-Japan index posted its highest level since mid-2021, marking a fourth consecutive session of gains. Local inflation prints drew limited attention as traders leaned into the broader growth story.

Risks That Could Disrupt Momentum

Despite enthusiasm, the rally faces vulnerabilities. AI valuations are increasingly pricing in robust future growth — any delays in infrastructure rollout, export controls, or supply bottlenecks could undercut sentiment.

Policy risk also looms. Rate cuts are priced aggressively, but sticky U.S. inflation or hawkish Fed commentary could challenge multiples. Concentration in technology remains another concern, with limited breadth across non-tech sectors threatening sustainability.

Local risks are also in play: Korea’s hotter-than-expected inflation has already complicated expectations for monetary easing, underscoring the fragility of the regional outlook.

Paths Forward

If AI-related demand continues to expand, partnerships, chip orders, and infrastructure spending could sustain the rally, keeping semiconductor and hardware firms in leadership.

A more moderate outcome would involve consolidation, with profit-taking into strength as traders wait for new catalysts such as earnings or export updates. But a negative turn — driven by hawkish Fed surprises, slowing global demand, or geopolitics — could unwind sentiment rapidly, given how crowded the AI trade has become.

Tips for Traders

• Taiwan Semiconductor (Zorrox: TSM) remains a bellwether for AI-driven momentum; watch earnings and order flow closely

• Japan’s Nikkei (Zorrox: JPN225.) benefits from chip and export strength, but is vulnerable to currency swings and policy shifts

• Track U.S. rate expectations — a hawkish surprise could destabilize Asia’s tech leadership

• Look for rotation into non-tech sectors if leadership narrows

• Monitor export and earnings guidance from Asia’s major chip firms as confirmation of the AI thesis

• Keep protective stops in place — sentiment-driven rallies in semiconductors can reverse abruptly