Asian technology stocks have started 2026 on a strong footing, extending a rotation that began late last year as investors grew wary of stretched valuations in US technology names. The rally reflects a broader recalibration of global portfolios, with Asia’s semiconductor-heavy markets emerging as a preferred destination for both growth and valuation-conscious capital.

For much of the past decade, US technology stocks dominated global equity performance, driven by platform economics, scale advantages, and more recently, artificial intelligence. That leadership intensified during the AI boom of 2023–2025, leaving benchmarks such as the Nasdaq 100 trading at historically elevated multiples. Against this backdrop, Asia’s technology sector lagged in valuation re-rating despite its central role in the global semiconductor and hardware supply chain.

That gap is now narrowing. A key Asia technology benchmark is already up about 6% so far in 2026, comfortably ahead of the roughly 2% gain in the Nasdaq 100. The relative outperformance signals a shift in investor perception, from viewing Asia tech as cyclical suppliers to recognising it as a core beneficiary of long-duration AI demand.

Strategists at Goldman Sachs Group Inc. have turned overweight on Asia’s technology sector, citing a combination of accelerating AI-linked demand and valuations that remain reasonable even after recent gains. Citigroup Inc. echoes this view, noting that global long-term investors are steadily accumulating Asian tech exposure due to the region’s importance in the semiconductor supply chain and the scope for earnings upside.

This shift is visible in flows. According to market participants, hedge funds, long-only investors, and passive strategies are all increasing allocations, particularly in South Korea, Taiwan, Hong Kong, and selective parts of Japan. The reallocation also reflects skepticism that US technology stocks can continue to deliver outsized returns after several years of strong performance.

At the heart of the Asia tech story is fundamentals. Samsung Electronics Co. recently reported preliminary operating profit that more than tripled to a record, helped by rising memory prices. Taiwan Semiconductor Manufacturing Co. posted revenue that exceeded market expectations, reinforcing confidence in advanced-node and AI-related chip demand.

Market performance is following earnings momentum. Shares of TSMC, Samsung, and SK Hynix Inc. have already risen between 8% and 16% this year. In Hong Kong, Hua Hong Semiconductor Ltd. has climbed more than 20%, reflecting renewed interest in Chinese semiconductor capacity amid policy support.

Strategists argue that this is not merely a tactical trade. As Dilin Wu of Pepperstone Group Ltd. puts it, US tech is increasingly seen as a “mature gold mine,” while Asian tech is viewed as undervalued but fundamentally strong, offering better marginal returns for new capital.

The valuation case remains central to the bullish argument. The MSCI Asia Pacific Information Technology Index trades at a forward price-to-earnings multiple of about 16.3 times. This compares with roughly 25 times for the Nasdaq 100 Index and the Philadelphia Stock Exchange Semiconductor Index.

What makes this discount notable is performance. The Asia tech gauge has outperformed the Nasdaq by around 33 percentage points since the end of 2024, yet still trades at a significantly lower multiple. Earnings growth expectations reinforce the divergence. Aggregate earnings per share for South Korea and Taiwan equity benchmarks are projected to rise 79% and 36% respectively over the next 12 months, versus about 28% for Nasdaq companies, according to data cited in a Bloomberg report.

Portfolio managers are increasingly reflecting this view in asset allocation decisions. George Molina of Templeton Global Investments notes broad-based demand across investor types, with particular strength in Korea and Hong Kong. In Japan, investors who had trimmed AI exposure toward the end of last year are now selectively adding back positions as earnings visibility improves.

China’s technology sector is also contributing to the positive tone. Optimism has been fuelled by developments such as DeepSeek publishing work on more efficient AI development methods and the growing global adoption of AI tools from Kuaishou Technology. Beijing’s push for technological self-sufficiency has further strengthened investor interest.

According to Bloomberg Intelligence, earnings growth for China’s tech megacaps is expected to hit an inflection point in 2026, potentially overtaking that of the US “Magnificent 7” for the first time since 2022.

Despite the optimism, risks remain. Vey-Sern Ling of Union Bancaire Privee cautions that any pullback in global AI spending could weigh on Asian chipmakers, particularly those most exposed to memory and foundry cycles. Geopolitical risks, especially around Taiwan, also remain a structural overhang.

Concerns are also rising over the sustainability of AI capital expenditure globally. Spending by Microsoft Corp., Alphabet Inc., Amazon.com Inc., and Meta Platforms Inc. is expected to rise sharply over the next year, but any slowdown could ripple through Asia’s supply chain.