Taiwanese stocks have risen 72% this year to dominate the world. Can they continue to beat Korean stocks? Foreign investors reveal the answer to "a set of numbers"

Taiwan and South Korea are benefiting from AI, so why are foreign investors betting more on Taiwan? The key is not just TSMC. (The picture shows a file photo)

[Financial Channel/Comprehensive Report] Taiwan stocks have soared 72% this year, ranking among the best among the world's major stock markets. Will they be able to continue to outperform Korean stocks? To this end, the allocation of international funds has revealed the answer. According to reports, Bank of America’s latest fund manager survey shows that about 40% of respondents are overweighting Taiwan stocks, which is significantly higher than the 25% who are overweighting Korean stocks.

When asked which market would benefit most from the next stage of the AI ​​cycle, 35% chose Taiwan and only 5% chose South Korea. This shows that fund managers are more biased towards Taiwan stocks in terms of investment allocation, and their choices for the next stage of AI will also be even more disparate. Between the two major AI markets of Taiwan and South Korea, funds are further tilted towards Taiwan.

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This year, both Taiwan and South Korea have caught up with the global AI investment boom. The Taiwan Weighted Index and Kospi once took turns to be at the top of the global stock market gainer list. Taiwan's weighted index has risen 72% so far in 2026, and about 10% of the constituent stocks have at least doubled their share prices, higher than Kospi's 4.1% and Japan's Nikkei 225 Index's 5.7%.

According to reports, what makes fund managers further favor Taiwan is not only stock price performance, but also the market's increasing confidence in the profit prospects of Taiwanese companies. In this regard, strategists such as Societe Generale's Rajat Agarwal said in a report that considering the divergence of profit growth trends, we continue to prefer Taiwan stocks to Korean stocks.

The article pointed out that in terms of valuation, the market expects the Taiwan Weighted Index to have a projected price-to-earnings ratio of about 18 times in the next year, while the Kospi Index will be about 5.5 times. The market believes that the lower valuation of South Korean stocks reflects the market's doubts that the memory cycle may be approaching its peak, and is partly due to the long-standing "South Korean discount."

Vikas Pershad, portfolio manager of M&G Investments in Singapore, said that the difference between Taiwan and South Korea is not only the degree of AI exposure, but more importantly, the source of profits. Taiwan's AI supply chain covers chip design and manufacturing, packaging, network communications and servers, so as AI spending expands, the scope of benefits will be wider.

Bershad pointed out that the profit growth of Taiwanese companies comes more from increased shipments, so the upward revision of profit estimates is wider and more sustainable; South Korea's recent profit growth is more dependent on price increases.

In comparison, this wave of AI market in Korean stocks is still concentrated on Samsung Electronics and SK Hynix. The two companies previously benefited from rising memory chip prices, rising for six consecutive quarters. However, in the three months to September, their stock prices fell by about 19% to 33%, and the market also began to pay attention to how long the memory upcycle can last.

However, the market is not unanimously bearish on the Korean memory industry. Peter Lee, co-head of Citigroup's global technology and communications research, believes that AI demand may further exacerbate semiconductor supply shortages and the market underestimates high-bandwidth memory (HBM) demand in 2027, so investors can start paying attention to Samsung and SK Hynix.

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