Nomura AM's Latest View on Taiwan Stocks – [Trader's Notes] Seizing the Upside of the Boom, While Preparing for Cyclical Shifts

Taiwan Weighted Index Performance over the Past 6 Months: (Source: Bloomberg, as of 2026/08/26)

Nomura On-the-Ground Insights:

Vera Rubin Volume Shipments Drive Supply Chain Growth Momentum

NVIDIA announced that its Spectrum-X silicon photonics switch has officially entered mass production, further enhancing visibility for large-scale Vera Rubin shipments starting by the end of Q3. From July revenue data, certain optical communication, server rail, and thermal management suppliers have already reflected strong pull-in demand from the new platform, with monthly performance exceeding market expectations. As leverage fund deleveraging in July has temporarily concluded, market focus is gradually shifting back to fundamentals such as corporate revenue, order visibility, and specification upgrades. With Vera Rubin entering actual shipment phase, the related supply chain benefits from both volume ramp-up and higher product pricing, strengthening fundamental support. These sectors remain key focus areas for future positioning.

Portfolio Manager Perspective:

Market Bullish Factors:

(1) Upward Revision in AI Capital Expenditure: The four major CSPs have raised their 2027 capex forecast to $1 trillion, indicating that the AI infrastructure investment cycle has not yet peaked.

(2) Continued Earnings Upgrades: Nomura AM’s internal equity pool estimates 2026 EPS YoY growth revised upward to 74%, marking the eighth consecutive month of upward revisions.

(3) Asia as a Critical Supply Chain Hub: Ongoing AI specification upgrades and persistent supply shortages driving price increases remain unchanged. Revenue visibility extends to 2028, ensuring continued benefits for the supply chain.

Market Bearish Factors:

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

(2) CSP Free Cash Flow Turning Negative: While short-term capex impact remains limited, sustained deterioration in cash flow could pressure future capital spending.

Seizing the Upside of the Boom, While Preparing for Cyclical Shifts

From a business cycle perspective, U.S. equities entered a boom phase in Q4 2025. A clear signal is that retail sales and consumer spending growth have outpaced disposable income growth, with market and economic support largely driven by wealth effects from rising asset prices. Historically, boom phases last between 12 months and up to 4 years. Although currently in an early stage with room for further gains, investors should remain vigilant: if AI capex growth slows between 2028 and 2030, supply chains may face inventory and capacity adjustments, potentially leading to economic slowdown or even recession. Therefore, while maintaining a positive long-term outlook, investors should gradually increase risk awareness in the short to medium term. Beyond monitoring key indicators such as CSP free cash flow, financing needs, supplier pricing power, and capacity ramp speed, investors should avoid cyclical stocks. These companies, despite benefiting significantly from AI demand, often face sharper corrections when the cycle turns. Strategically, a full exit is not yet warranted—boom periods typically offer substantial upside. A suitable approach is “continuous participation with phased profit-taking,” avoiding chasing individual hot stocks and shifting toward disciplined, stock-picking funds or ETFs to preserve room for future market corrections.

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