Investing.com-- Taiwan’s stock market rally could extend into 2026, underpinned by strong earnings momentum from the artificial intelligence (AI) supply chain, though investors should remain diversified, UBS analysts said in a new research note.
The Taiwan Weighted index, also known as Taiex, has surged past 28,000 to a record high, supported by rising profit expectations and investment in semiconductor and hardware components, UBS analysts said.
The bank sees the benchmark reaching 23,840 in 2025 and 29,023 by end-2026, implying more upside as earnings growth accelerates to an estimated 19% next year.
While there is debate over a potential AI bubble, UBS views the Taiex’s premium valuation of 19 times 2026 earnings as justified by roughly 20% profit growth within our coverage universe.
Analysts added that earnings upgrades could continue if the AI supply chain successfully executes new product ramps and monetizes heavy capital spending.
UBS remains constructive on Taiwan’s AI technology ecosystem but recommends investors diversify exposure.
It highlighted opportunities in automation, naming Advantech (TW:2395) as a key beneficiary of smart manufacturing; consumer tech, citing United Microelectronics Corporation (TW:2303) and LARGAN Precision (TW:3008); and high-dividend stocks, with seasonal strength expected through the first half of 2026.
Among its top picks, UBS added UMC and Advantech to its most-preferred list, while dropping E.SUN Financial (TW:2884) due to capital-management uncertainty.
On the least-preferred list, it included Compal Electronics Inc (TW:2324) and Asustek Computer Inc (TW:2357), citing muted notebook demand and normalization in gaming hardware after a strong 2024.
The bank also noted that rising capital expenditure in the tech sector could drive credit demand, supporting Taiwan’s financial institutions.
