Nomura AM's Latest View on Taiwan Stocks – [Trader's Notebook] Geopolitical Volatility Creates Investment Opportunities

Taiwan Weighted Index Performance over the Past 6 Months: (Source: Bloomberg, as of July 15, 2026)

Nomura On-the-Ground Perspective:

Geopolitical Volatility Creates Investment Opportunities

The market's biggest concern remains the potential for US-Iran conflict to push up oil prices, reignite inflation, and force the Fed to hike rates. However, oil price reactions recently have been far more moderate than during the initial phase of US-Iran tensions earlier this year. Back then, WTI briefly reached $110–$115; this time, the peak is only around $80, indicating that oil supply has not deteriorated as severely as initially feared. Even though Iran continues to use the threat of blocking the Strait of Hormuz as a negotiation tactic, the actual impact remains uncertain. Gulf countries are also reducing their reliance on the Strait through alternative oil pipelines. According to the latest CPI data, inflationary pressures from energy and commodity prices are gradually fading, and long-term inflation expectations remain stable. Therefore, as long as oil prices do not remain above $90–$100 for an extended period, the risk of the Fed resuming rate hikes is unlikely to spiral out of control. Geopolitical news will continue to cause market volatility, but if fundamentals remain intact, pullbacks offer opportunities to reposition portfolios.

Manager's Perspective:

Bullish Factors for the Market:

(1) Strong AI Investment: Global tech giants continue to raise 2026 capital expenditure forecasts, and the AI investment cycle has not yet peaked.

(2) AI Supply Chain Bottlenecks: Key segments of the AI supply chain remain supply-constrained, with shortages and price increases expected to last through 2027, benefiting Taiwan-based suppliers.

(3) Upward Earnings Momentum: Nomura AM forecasts full-year 2026 EPS growth for Taiwan stocks at +56%, continuously revised upward and leading major global markets.

Bearish Factors for the Market:

(1) Fragmented Market Positions: The market is flooded with short-term speculative capital, with rapid fund rotation and no clear investment theme, creating pressure on market upside momentum.

(2) Uncertain Interest Rate Outlook: Evolving US-Iran tensions and inflation pressures create uncertainty around Fed policy, leading to correction pressure on high-valuation tech stocks.

AI Fundamentals Unchanged – Wait for Positioning to Stabilize Before Buying Quality Leaders

Based on Nomura’s tracking of supply chain orders and shipments, there are currently no signs of a reversal or deterioration in AI fundamentals. The recent correction in Taiwan and global equities is primarily due to profit-taking by speculative and leveraged funds. In Taiwan’s case, the same short-term capital is rapidly rotating among memory, ABF substrates, passive components, and silicon wafers. Chasing only the strongest themes can lead to losses on both sides. Returning to the long-term AI trend, global cloud service providers’ capital expenditure has not slowed this year and may even increase next year. As AI chip size, heat output, and power consumption rise, and high-speed transmission faces bottlenecks, the direction of AI server specification upgrades remains unchanged. Recently, many high-quality AI stocks have pulled back 30–50% from their peaks, some nearly halved, yet their revenue and earnings growth logic remains intact, and valuations are gradually returning to reasonable levels. Therefore, we recommend patiently waiting for market positioning to stabilize before buying into leading AI companies that benefit long-term from AI capex and specification upgrades, hold leading industry positions, and show steady earnings growth.

Economic outlooks mentioned in this article do not necessarily represent fund performance. Please read the fund’s prospectus for investment risks.