Not Just NVIDIA, UBS Also Backs Taiwan! Report Highlights Strong AI Chip Demand, But Global Stocks Face Two Major Challenges

Recent international stock markets have experienced significant volatility, with technology stocks hit hardest. Following NVIDIA (NVDA-US) CEO Jensen Huang's strong endorsement of Taiwan, stating it 'saved the U.S. semiconductor industry,' Hu Junli, Head of Asian Asset Allocation at UBS Wealth Management Investment Office (CIO), stated today (24th) that UBS's latest report indicates strong AI chip demand in Taiwan. He emphasized that Taiwan's corporate profitability and capital expenditure resilience continue to support upward momentum in global stock markets. However, investors must remain vigilant regarding two major challenges: the need to validate returns on AI investments, and interest rate uncertainties triggered by geopolitical tensions and inflation. UBS recommends a diversified investment strategy to navigate market fluctuations.

UBS notes that U.S. corporate earnings growth continues to broaden, with S&P 500 first-quarter profits rising approximately 20% year-on-year, and second-quarter growth expected to further increase to 28%. All 11 major sectors are projected to achieve profit growth this year. AI remains the most critical long-term growth theme, with sustained strong demand for cloud computing, data centers, and advanced chips.

For Taiwan, the AI demand surge is driving semiconductor industry growth. Taiwan's leading foundry reported a 36% year-on-year revenue increase and a 77% profit surge in Q2, and has raised its full-year capital expenditure target—reflecting continued strong demand for AI chips. As a global hub for high-end chip design, manufacturing, and advanced packaging, Taiwan will continue to benefit from the global wave of AI infrastructure investment.

Hu Junli outlined key market trends: Globally, UBS has upgraded its outlook for European and Indian equities. Europe benefits from manufacturing recovery and easing inflation, supported by structural themes such as electrification and defense. In Asia, India's economic reforms and Japan's corporate governance improvements, along with foreign capital inflows, are driving positive momentum. Investment opportunities are expanding beyond a few tech giants into broader sectors such as finance, healthcare, aviation, and industry. Hu analyzed that investment opportunities are no longer confined to the U.S. market.

Nonetheless, two potential challenges remain for global equities. First, if the current AI investment boom fails to translate into expected commercial returns, leading companies may face earnings and valuation adjustments. Second, geopolitical tensions and energy supply disruptions could push oil prices higher, reigniting inflation and affecting central banks' rate-cut expectations, thereby pressuring risk asset valuations. Hu cautioned investors to monitor these risks closely.

Looking ahead, global equities still have room for further gains, driven by a broader range of industries. Investors should adopt a balanced and diversified allocation, capturing opportunities across U.S., European, and Asian markets. By including high-quality bonds, gold, and commodities, portfolios can participate in global growth while enhancing stability and resilience. Hu Junli emphasized that diversified allocation enables investors to better navigate market changes with confidence.