Nomura AM's Latest View on Taiwan Stocks – [Trader's Notes] Oil Prices Volatile Downward, AI Demand Drives Taiwan Supply Chain Profits Upward

Taiwan Weighted Stock Index Performance Over the Past 6 Months: (Source: Bloomberg, as of 2026/08/12)

Nomura AM's Perspective:

Avoid Chasing Order-Shifting Themes; Focus on Areas Where Taiwanese Firms Truly Benefit

Regarding market speculation that the U.S. may restrict exports of Chinese optical communication products, current assessment suggests that Chinese suppliers account for approximately 60% of global optical transceiver production capacity. Given the long certification period for high-speed optical modules, such restrictions could delay U.S. data center deployments, which would be counterproductive for the U.S. Moreover, optical transceivers primarily handle signal transmission and are less strategically sensitive than GPU chips, so there is no urgent need for the U.S. to impose a full blockade. Therefore, the likelihood of a comprehensive ban being implemented is low. Rather than chasing short-term policy-driven order shifts, greater attention should be paid to whether trends in optical communications and CPO (Co-Packaged Optics) are changing, and to the areas where Taiwanese manufacturers truly hold advantages. Taiwan’s competitiveness remains concentrated in high-end chip packaging, probe cards, and testing equipment—sectors that benefit not only from CPO development but also from demand for advanced processes and foundry services, offering higher investment visibility and greater upside potential.

Manager's Perspective:

Positive Factors for the Market:

(1) Sustained AI Investment Momentum: Global tech giants have raised their 2026 capital expenditure forecasts, with strong demand for AI infrastructure and no signs of the investment cycle peaking.

(2) Continued Strength of Asian Supply Chains: Ongoing trends of specification upgrades and price increases due to supply shortages extend corporate visibility to 2028, with Taiwan’s supply chain continuing to benefit.

(3) Corporate Earnings Continuously Revised Upward: Nomura AM’s Taiwan equity portfolio forecasts a +64% increase in overall EPS for 2026, consistently outpacing major global markets.

(4) Margin Financing Position Cleansing Nears Completion: Taiwan stock margin maintenance ratios have dropped to historical lows, indicating healthier positioning that supports a potential market rebound.

Negative Factors for the Market:

(1) Non-Fundamental Noise Disturbances: Geopolitical tensions (e.g., U.S.-Iran conflict), inflation pressures, and interest rate uncertainty continue to exert valuation correction pressure on equities.

Oil Prices Volatile Downward, AI Demand Drives Taiwan Supply Chain Profits Upward

Since May, Taiwan stocks have undergone volatile corrections, primarily triggered by oil price uncertainty due to escalating conflicts and market concerns over Fed rate hikes. However, the momentum for oil prices to breach $100 per barrel is clearly weakening, as the actual crude supply deficit is not as severe as initially feared. With alternative pipelines and U.S. military escorts, the affected supply volume may be less than a quarter of initial estimates (5 million barrels per day), making a breakout above pre-July 23 highs unlikely. Given that oil’s impact on inflation is manageable, the Fed is expected to hike rates at most once this year, or even maintain rates unchanged—reducing pressure on equities. Returning to fundamentals, Taiwan stock earnings forecasts for 2026 have been consistently revised upward since September last year. Major U.S. CSPs continue to raise capital expenditures, with strong AI supply chain demand and orders extending visibility for some firms to 2028 or even 2030. While stock prices may fluctuate with market news, maintaining conviction in companies with competitive advantages and high growth visibility remains key to long-term success.

Economic outlooks mentioned in this article do not necessarily represent fund performance. Please refer to the fund prospectus for investment risks.

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