Randy Abrams, head of Taiwan research at UBS, says TSMC's strong outlook for 2026 is a positive signal for the Taiwanese market and the US-Taiwan trade deal removes some of the investment uncertainty. However, swing factors, such as AI-native companies' ability to monetize their services and potential recession risks, could moderate any potential upside to the market.

Taipei City

UBS analysts suggest that Taiwan's stock market may experience a gradual upward trend, despite strong momentum in the AI sector and a positive outlook from TSMC. TSMC's recent report exceeded expectations in growth and capital expenditure, and a new trade deal with the United States is expected to reduce some tariff and investment uncertainties for Taiwan.

The report highlights continued strong demand for advanced chips, driven by investments from cloud service providers and AI companies. However, analysts caution that the pace of stock gains may be moderate, as future growth depends on factors such as the monetization of AI-native companies and the broader economic environment.

Taiwan stocks might have to grind higher despite AI strength: UBS

Of course, a strong report card from TSMC, but then also this trade deal with the United States. What will that mean for the Taiwan market? Yeah, so it is a strong day. Thanks for having me on. The kickoff for TSMC, they're always the first big tech company to report results and a strong outlook. I think investors already expecting a good year. Our outlook into the year was for a strong year, but TSMC actually upsided that on quite a few measures. Their growth outlook for the year, CapEx outlook was higher, and their view, this is a multi-year cycle. So we had that from TSMC, and because they supply just about everyone in the chip industry on advanced AI, advanced PC smartphones, that's a good signal of their outlook for the year. And then of course, what you mentioned, we have the trade deal as well. So that may resolve a bit of the tariff uncertainty, a bit of the investment uncertainty for Taiwan. So is it risk on? Do you validate that? We heard from C.C. Wei yesterday. He was talking about the AI megatrend, and they're willing to spend $56 billion in the next year. Yeah. So our view into the year, it was the first part with TSMC mentioned strong year for AI. We did say for the stocks, even though strong year, it could be a grind higher year for the stocks. And that really comes back to what we can see the setup for this year, why strong year. The CapEx is set. We do have very strong CapEx outlook from cloud service providers. We do know that the companies like OpenAI Anthropic want to stay competitive. They're going to be invested. We're still short of demand. Supply is short of demand for compute. TSMC mentioned short of demand for silicon. That gets back to strong year. Why I think a grind higher, there's still swing factors when we look out to AI over the next several years. Right now, I'd say those swing factors look pretty good. We have the cloud providers growing their cloud business at a pretty strong pace, low to mid 30s. We have strong internet growth. So that's a good backdrop. Swing factors are the AI natives. Do they monetize? They have a pretty big user base, but can they do what the social media companies did? Build up advertising, build up subscriptions, because that'll support them being able to continue to spend. Do we avoid in the next, say, if we go two to three years out, a recession? Because that usually slows the growth for the big internet companies. If they slow growth, if they slow cloud, or they catch up to compute demand, things could moderate if we look at a year or two. Investors are investing not just for this year's AI, but how they feel about sustainability.

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Washington

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Tehran

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Minneapolis

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Tel Aviv-Yafo

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Jerusalem

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Kyiv

Ukraine Invasion

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Nuuk

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California

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Venezuela Strikes

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Sikhio District

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Ottawa

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Vero

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London

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Breakdown