Global funds flow back into Asian AI stocks as war tensions ease

[SEOUL] As tensions in the Middle East begin to ease, global investors are turning their attention back to the artificial intelligence (AI) trade, funnelling fresh funds into Asian tech stocks after weeks of selling.

Tech-heavy Taiwan and South Korea equities have received a combined US$7.9 billion in net foreign buying this week, the data compiled by Bloomberg revealed, snapping more than a month of outflows. 

While the inflows are still modest after a record US$70 billion withdrawal in March, it shows some investors are rotating back to growth stocks despite lingering geopolitical risks.

Signs of positive earnings momentum are also adding to the optimism. Samsung Electronics blew past expectations with a jump of eight times its previous level in quarterly profit on Apr 7, reinforcing the AI-driven demand boom. 

Ling Vey-Sern, a managing director at Swiss bank Union Bancaire Privee, said: “Investors believe the war is ending, so the key trade of Asian AI picks and shovels is coming back.”

“Beyond that, Samsung’s strong earnings” on Apr 7 also underscored the optimism evident in profit estimates, he added. 

Concerns about the durability of the AI-driven rally, however, still linger.

Optimism remains fragile, amid fears that capital expenditure may be peaking as energy costs rise, with Jefferies Financial Group turning more underweight on South Korea.

The picture of foreign flows is also uneven in Asia, with Indian equities continuing to face selling.

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The South Asian nation, which lacks major AI companies, experienced outflows reaching US$17.8 billion over a record 23 straight sessions till Apr 7, putting it on the cusp of surpassing the record in 2025.

Global funds bought Taiwanese stocks worth US$5.2 billion so far this week, on course to mark their third biggest weekly purchase on record, data compiled by Bloomberg showed.

South Korean shares have seen US$2.7 billion in net inflows.

Japan – home to chip-equipment stocks such as Tokyo Electron – also attracted around US$12 billion in foreign inflows in the first week of April. 

Since the start of the year, the 12-month forward estimates for South Korea’s benchmark index have surged about 70 per cent, compared with a 17 per cent gain for Taiwan’s gauge and a 9 per cent increase for the MSCI World Index, Bloomberg-compiled data revealed.

As a result, shares of sector bellwether Taiwan Semiconductor Manufacturing Company, which will report results on Apr 16, are close to reaching a record high after rising about 10 per cent in the second week of April.

Shares of Samsung Electronics and SK Hynix have climbed 11 and 17 per cent, respectively. BLOOMBERG