AI Stocks Plunge: Should You Flee or Buy Taiwan Stocks? Chinatime Fund: Fundamentals Unchanged, Pullback Offers Better Entry

Last week, a wave of panic selling hit global AI and semiconductor stocks, causing the Philadelphia Semiconductor Index to plummet approximately 11% in a single week. Taiwan’s stock market recorded its largest single-day point drop in history on July 17, prompting concerns among investors about whether the AI boom is cooling down. Chinatime Fund stated today (20th) that, based on recent financial reports from global tech leaders, corporate profits and AI-related capital expenditures remain robust. This market correction is less a reversal of fundamentals and more a result of deleveraging and fund reallocation amid high valuations. Rather than reacting to short-term volatility, investors should focus on leveraging the pullback to position themselves for long-term growth trends.

Chinatime Fund’s General Manager, Chang Jung-jen, pointed out that the biggest market misconception is equating stock price corrections with weakening industry fundamentals. In reality, AI demand remains unchanged, and Taiwan’s semiconductor supply chain competitiveness has not diminished. What has changed is market positioning and investor sentiment. AI-related stocks have seen extraordinary gains over the past year, and with valuations running high, any deleveraging or profit-taking can trigger sharp short-term price swings—this does not mean the long-term AI trend has ended.

One trigger for this correction, Chang noted, was South Korea’s regulatory tightening on leveraged ETFs for individual stocks. Korean retail investors have long used margin trading and leveraged ETFs to heavily bet on semiconductor blue chips like Samsung Electronics and SK Hynix. When regulators announced higher margin requirements and restrictions on such products, fears arose that leveraged funds would be forced to liquidate, causing Korean stocks to fall sharply first. This quickly spread selling pressure to global semiconductor and AI-related stocks. However, this decline reflects fund-level adjustments, not a shift in underlying industry demand.

Chang emphasized that although Taiwan’s stock market declined alongside the global semiconductor sell-off, Taiwan maintains a comprehensive competitive advantage in the global AI supply chain. From foundry services and IC design to advanced packaging, high-performance computing, and AI server manufacturing, Taiwan plays an irreplaceable role.

As the world’s four major cloud service providers continue expanding AI capital expenditures and enterprises worldwide accelerate the adoption of generative AI, Taiwan’s tech industry will remain a primary beneficiary. Therefore, short-term volatility helps absorb excessive valuations, bringing the market back to fundamentals and offering long-term investors more reasonable entry opportunities.

Yet, whenever markets fall sharply, many investors instinctively think, “Sell first, buy back when it drops further,” hoping to improve returns through market timing. Chang warns, however, that the real challenge isn’t selling—it’s knowing when to buy back.

Chinatime Fund conducted a nearly century-long backtest using the S&P 500 total return index from December 1927 to July 2026, comparing two strategies: “buy and hold” versus “sell when prices drop 10% from peak, buy back when index reclaims its quarterly moving average.” The results showed that over a 30-year holding period, the buy-and-hold strategy yielded an average cumulative return of 2,241%, significantly outperforming the short-term trading strategy’s 1,707%—a difference of 534 percentage points.

Chang analyzed that while tactical trading may appear to avoid some losses, it often causes investors to miss the most crucial early rebound phase, which typically determines long-term investment performance. Historical evidence repeatedly shows that the greatest market risk isn’t short-term corrections, but exiting the market and missing the compounding gains from subsequent recoveries.

Chang stressed that the long-term growth trend of the AI industry remains intact, and Taiwan’s tech competitiveness continues to strengthen. Every significant market shake-up driven by sentiment or fund flows presents long-term investors with a key opportunity to accumulate quality assets.

Rather than spending time guessing the bottom, Chang emphasized building a disciplined investment strategy—through dollar-cost averaging, phased investing, or leveraging the 'Chinatime Super Bottom King' mechanism to automatically increase positions during market pullbacks, accumulating more fund units with the same capital. When the market returns to fundamentals and AI growth momentum lifts Taiwan stocks again, these low-cost positions will be better positioned to generate long-term compounding returns for investors.