Margin Liquidation Sparks Rebound: TSMC, Largan, AU Optronics in Focus

I. Market Dynamics and Structure

Index Performance: The Taiwan stock market continued its prior-day panic sell-off, briefly breaking below the 40,000-point threshold and hitting a low of 39,384 points. It closed down 1,564 points at 40,039 points, with trading volume surging to TWD 1.09 trillion, reflecting a wave of panic-driven liquidation and stop-loss selling.

Technical Analysis: The index remains suppressed by resistance from the 10-day, monthly, and quarterly moving averages. Short- and medium-term moving averages are in a bearish alignment, indicating continued structural weakness. However, a long lower shadow of 654 points suggests emerging buying support at lower levels.

Positioning: Foreign investors and proprietary traders continue to adjust positions. Margin debt dropped nearly TWD 100 billion in just eight trading sessions (TWD 70 billion on the main board, TWD 29.2 billion on the over-the-counter market), signaling rapid deleveraging and paving the way for future position stabilization.

II. Three Core Downside Risks Behind the Sell-Off

AI Bubble Concerns Intensify:

(1) NVIDIA’s large-scale investments and fundraising (totaling USD 750 billion) have raised concerns about 'circular financing'.

(2) Collaborations with SK Hynix and OpenAI involve capital flowing back into chip purchases, leading the market to question the authenticity of demand.

(3) If AI demand falls short of expectations, it could lead to overinvestment and widening losses across the industry.

Changes in Semiconductor Competitive Landscape:

(1) Reports of progress in China’s independently developed immersion DUV lithography machines have sparked market concerns about equipment substitution.

(2) However, these machines are still in early testing phases and significantly lag behind ASML’s mature systems, limiting short-term impact.

(3) JPMorgan notes a vast gap between prototypes and mass production, with commercialization remaining highly uncertain.

Cumulative Macro and Industry Headwinds:

(1) Despite strong earnings growth, SK Hynix’s results fell short of expectations, reigniting concerns about cooling AI demand.

(2) The probability of a Fed rate hike has risen above 30%, leading to a more conservative funding environment.

(3) Global risk appetite has declined, causing broad selloffs across Asian equities.

III. Key Outlook Indicators and Trend Assessment

Short-Term:

(1) Technically weak, with risk of retesting lows.

(2) However, rapid margin debt reduction and released panic sentiment suggest conditions for a short-term reversal are nearly met.

Medium-Term:

(1) The fundamental outlook for the AI industry remains unchanged, driven by structural growth in demand.

(2) Jensen Huang emphasizes that AI demand represents an industrial-scale expansion, with 5–10x growth potential over the next decade.

Support from Fund Flows:

(1) Support is forming from domestic institutional buying, mutual funds, ETFs, and local capital inflows.

(2) After deleveraging, positioning has stabilized, favoring a sustained rebound.

IV. Rebound Potential and Historical Comparison

Expected Rebound Range: Initial recovery could reach 44,000–45,000 points.

Historical Precedent:

After the panic selloff in April 2025, margin debt dropped by TWD 86.2 billion, and the index rebounded from 17,306 to 28,554 points, demonstrating that extreme fear is often followed by a medium-term bullish phase.

V. Industry Trends and Investment Themes

AI Enters a New Phase: Transitioning from generative AI to 'Agentic AI', driving higher computational demands.

Core Growth Drivers:

(1) TSMC (2330-TW) mass production of N2P and A16 processes

(2) CoWoS and advanced packaging capacity expansion

(3) Exploding CSP capital expenditures (Microsoft, AWS, Google, Meta, Oracle)

Long-Term Investment Sectors:

ASIC design, CPO silicon photonics, ABF substrates, PCB/CCL, memory, passive components, advanced packaging equipment, foundry services, low Earth orbit satellites, etc.

VI. Investment Strategy Recommendations

Short-Term Strategy:

(1) Strictly adhere to 'buy low, avoid chasing highs'.

(2) Use panic corrections to identify and position in high-quality stocks.

Rebound Execution:

(1) Reduce exposure to stocks with disappointing growth or messy positioning.

(2) Accumulate low-base stocks with improving earnings on pullbacks.

Risk Management:

Strictly control capital allocation, avoid excessive leverage, and flexibly adjust portfolio weights.

Conclusion:

This downturn is primarily driven by 'emotional panic and position cleansing'. While short-term volatility persists, the long-term AI trend remains unchanged. With fundamental support and capital inflows, the market is likely to stabilize and enter a rebound phase.

To succeed, you must be different.

Next to every crash lies massive profit.

This is the unchanging law of the stock market.

Which stocks are worth watching on pullbacks?

Which stocks should you trim during the rebound?

This is crucial. You must know.

If you have questions about your holdings,

uncertain how to manage or adjust them,

feel free to message Dashi-xiong on LINE.

Leave your name and contact number,

and Dashi-xiong will support you with integrity,

helping you switch from stagnant 'mom-and-pop stocks'

to high-potential winners that will soar in the future.

Let you reclaim a colorful life.

A single shift in mindset can change your life.

13-time champion in the Commercial Times performance contest, outperforming peers with proven expertise.

For real-time insights and explosive stock opportunities → Join Dashi-xiong’s Biaogu Xintiandi community.

LINE@ URL: https://line.me/R/ti/p/%40gold99

Telegram URL: https://t.me/gold0999

YouTube Personal Channel: youtube.com/@master55688

A small effort—remember to like, subscribe, share, and turn on notifications.

Help more people see our videos.

Consultation Hotline 02-2321-9933 (24-hour service)

Consultation Hotline 02-2321-9933 (24-hour service)

Source: Lun Yuan Investment Consultant, Analyst Chen Xuejin

The securities recommended and analyzed by our company

have no improper financial interests. Past performance does not guarantee future profits.

Investors should make independent judgments, conduct careful evaluations, and bear investment risks on their own.