Controversy over slowdown in AI development heats up; Taiwan stock supply chain fundamentals remain resilient

■Ouyang Weitang

AI giants had a lot of discussion in September on whether the development of artificial intelligence is slowing down. The market is worried that this debate will increase market sentiment fluctuations. However, the mid- to long-term fundamental impact on the Taiwan stock market, which has accounted for all the benefits of AI investment and has increased by more than 60% this year, is expected to be limited. It is even expected to further increase the demand for computing power in model evaluation, monitoring, and inference.

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Should AI development slow down? Security debate between technology giants and chip leaders heats up

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The CEO of Anthropic recently advocated that the progress of cutting-edge models should be slowed down while safety assessments keep up. The CEO of OpenAI later agreed that "slowing down is not stopping." However, some leading AI chip manufacturers pointed out that safety and speed are not a matter of choice. Products that have not yet reached safety standards should be postponed, while those that are safe do not need to slow down. He also predicted that AI chip sales will double next year. The two factions advocated that the debate on whether AI development should be slowed down fermented in the market and became a noise that affected market sentiment recently.

The controversial subject of the slowdown in AI development is the speed of model training, not the total amount of computing power, and security assessment and attack drills (Red Teaming) and model monitoring themselves require computing power. Information security is not a substitute for computing power, but a new use. The impact on the AI supply chain is not expected to be too great. In addition, Anthropic, which is the most active advocate for slowing down its pace, has made profits for two consecutive quarters. In the third quarter, its gross profit margin even exceeded 80%. The computing power plan continues to expand. This shows that the industry advocates adjusting the pace of model release and security verification rather than reducing investment in computing power.

In addition to the industry, a plaintiff also filed a lawsuit in the United States in mid-September, accusing four major players of privately agreeing to slow down and jointly monopolizing AI development. If the players jointly slow down model development in a coordinated manner, they may also face antitrust law disputes. Even if security reviews are on the way in the future, the rules that will become stricter will be the model release threshold, not the data center procurement volume.

AI wave drives exports and investment, Taiwan stock supply chain continues to strengthen

Although the noise of the slowdown in AI development may cause market fluctuations in the short term, under this wave of AI development, the impact on the supply chain of Taiwanese manufacturers, which plays an important role in "selling shovels", should not be too great. Benefiting from the rapid development of AI, Taiwan stocks have risen by about 60% this year, ranking first in the world's major stock markets. The central bank has revised upward the economic growth rate for 2026, and exports have been growing for 34 consecutive months, indicating that foreign demand and private investment are still strong. Among them, AI-related demand is an important force in pushing up Taiwan's exports, capital expenditures and corporate profits. What is even more noteworthy are the changes within the supply chain. The legal person estimates that CoWoS production capacity will increase by approximately 70% annually in 2027, while domestic ABF carrier board manufacturers will expand their production by approximately 30% to 40%.

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What pushed up the Taiwanese stock market this year was not the "dream ratio" but actual orders and shipments. Legal entities' profit forecasts for Taiwanese companies are still rising, with the largest increase in emerging Asia. As long as the index remains above the quarterly line and corporate profit estimates have not been revised downwards, the retracement can be regarded as an opportunity for batch layout; if large cloud companies reduce capital expenditures, foreign investment turns to continuous overselling, the index falls below the quarterly line and the pattern is established, or the annual growth rate of AI supply chain revenue slows down significantly for two consecutive months, it is an opportunity to re-examine the level of shareholdings.

With the U.S. monetary policy tightening and interest rates in Taiwan remaining unchanged, Taiwanese factories' local financing costs have not been further increased by the policy interest rate, and their profits have continued to benefit from the growth of global AI investment, forming a policy mix that is relatively conducive to the fundamentals of Taiwan stocks. Short-term noise is unlikely to have a disruptive impact on the mid- to long-term performance of Taiwan stocks.

(The author is Chief Investment Officer of KGI Investments)

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