Navigating Near-Term Challenges: Why Asian Tech Stocks Still Hold Long-Term Promise

The Asian tech sector faces a familiar paradox: near-term headwinds loom large, yet structural tailwinds remain unshaken. UBS’s Suresh Tantia, Chief Investment Officer and APAC Strategist, recently outlined this duality, emphasizing that while Taiwanese equities grapple with a strengthening local currency and Chinese stocks await clarity on U.S.-China trade talks, the region’s tech dominance ensures long-term resilience. For investors, the key lies in distinguishing cyclical noise from secular trends.

Taiwan: Currency Pressures vs. Semiconductor Supremacy
Taiwan’s tech sector, the global linchpin of semiconductors and advanced electronics, is currently contending with a rising New Taiwan Dollar (TWD). . Tantia notes that currency appreciation could temporarily dampen export competitiveness, as a stronger TWD reduces the dollar-denominated revenue of Taiwanese firms. .

However, Taiwan’s structural advantages—such as its 92% global market share in advanced 5nm chip manufacturing—act as a buffer. Companies like TSMC, the world’s largest contract chipmaker, continue to secure multi-year contracts with U.S. tech giants, insulating them from short-term macroeconomic swings. “Taiwan’s tech ecosystem is too deeply embedded in global supply chains to be easily dislodged,” Tantia states. Over the next decade, the region’s $150 billion in planned semiconductor capital expenditures will further entrench its leadership.

China: Trade Talks as an Equity Catalyst
Chinese equities, meanwhile, remain hostage to geopolitical tailwinds. Tantia’s hope that U.S.-China trade negotiations will “start soon” underscores the criticality of de-escalating tensions. The MSCI China Tech Index has underperformed its global peers by 20% since 2020, largely due to trade restrictions and supply chain disruptions. A resumption of talks could alleviate fears of further tariffs and ease access to U.S. technology.

Yet optimism is tempered by the complexity of U.S.-China relations. Even incremental progress—such as a phased tariff rollback—could spark a rally in sectors like AI hardware (e.g., GPU manufacturers) and cloud infrastructure, which rely on cross-border collaboration. .

The Broader APAC Tech Landscape: A Two-Speed Recovery
Tantia’s analysis highlights diverging paths within Asian tech. Taiwan’s export-oriented model faces immediate currency headwinds, while China’s domestic-driven tech growth hinges on policy clarity. Meanwhile, Southeast Asia’s tech sector—booming in fintech and e-commerce—serves as a counterbalance.

The region’s $2.3 trillion tech market is also being reshaped by AI adoption. Taiwan’s semiconductor prowess and China’s AI software innovation (evident in firms like DeepSeek) create a complementary ecosystem. This synergy positions APAC as the global center of advanced manufacturing and AI development, even as geopolitical risks persist.

Conclusion: Positioning for the Tech Decade
The data is unequivocal: Asian tech stocks are undervalued relative to their strategic importance. Taiwan’s tech sector trades at a 30% discount to its 10-year average P/E ratio, despite its irreplaceable role in global supply chains. Chinese tech stocks, meanwhile, offer a 40% upside if trade tensions ease—a scenario Tantia deems increasingly probable as both nations seek economic stability.

Investors should focus on two pillars: Taiwan’s hardware backbone and China’s software frontier. Specific targets include TSMC (for its 5nm leadership), ASML (a key supplier to Taiwanese fabs), and China’s AI unicorns. While near-term volatility may persist, the long-term narrative—driven by semiconductor innovation, AI adoption, and supply chain resilience—is unmistakable.

As Tantia concludes, “The Asian tech story isn’t about avoiding risks—it’s about recognizing which risks are worth taking.” In a world hungry for innovation, that story is far from over.