The U.S. might be selling the dream of AI, but Asia is building its backbone and offers rich opportunities for investors.
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In a new report from major bank Saxo, Asia – primarily South Korea, Japan and Taiwan – is described as being indispensable to the AI ecosystem, providing much of the ‘machinery’ needed to make systems, products and services work.
Fundamentals Not Hype
“In our view, Asia’s enablers offer cheaper, more earnings-linked exposure to the AI build-out,” Saxo said. “When hype cools, fundamentals count. Asia sits on the capex inflow, not the outflow. Its factories continue running regardless of which U.S. platform wins the software race.”
Indeed, according to company filings, Asia accounts for around 70% of leading-edge chipmaking capacity with TSMC (TSM) leading the way, 90% of high-bandwidth memory powered by SK Hynix and Samsung (SSNLF), and nearly all advanced packaging capacity. Share prices have rocketed as a result this year – see below:
It added that Japan’s Lasertec (LSRCF), Advantest (ATEYY), and Ibiden (IBIDF) remain essential for inspection, testing, and substrates.
Saxo also said that the move this week by SoftBank (SFTBY) to sell its $5.8 billion Nvidia (NVDA) stake was to refocus on Japan’s AI ecosystem.
“Meanwhile, the physical build-out of AI infrastructure — chips, servers, data centers — continues at full speed, and much of that is happening in Asia,” it said. “As investors shift focus from who builds the smartest AI to who supplies the tools, Asia’s enablers may represent the value side of the AI trade. They are evolving from suppliers to strategic control points in the global AI value chain.”
U.S. Comparisons
Saxo likes the Asian AI stocks’ lower valuations compared with U.S. peers and earnings visibility with multi-quarter order books providing “steadier forecasts.” They are also being supported by Japan’s governance reforms and Korea’s similar Value-Up drive to boost shareholder returns.
While Saxo says that U.S. firms remain the innovation leaders, several risks are emerging. One is a concentration risk with a handful of stocks such as Nvidia, Microsoft (MSFT) and Alphabet (GOOGL) dominating the AI market.
It also worries that the surge in infrastructure spending is on a scale unprecedented “even by dotcom or mobile-era standards, and the magnitude makes the return on investment questionable.”
It added that high multiples in these U.S. stocks mean small disappointments can trigger sharp moves. “If fiscal risks in the U.S. come back into focus and bond yields rise, long-duration assets such as growth and AI-linked stocks could face renewed valuation pressure as discount rates reprice,” it warned.
Is TSM a Good Stock to Buy Now?
On TipRanks, TSM has a Strong Buy consensus based on 8 Buy and 1 Hold ratings. Its highest price target is $400. TSM stock’s consensus price target is $344.50, implying an 18.32% upside.
