Taiwan's central bank governor warns of AI bubble risks despite real growth

Global semiconductor sales surpassed $1 trillion through August for the first time in history, the Semiconductor Industry Association reported. Sales totaled $159.7 billion in August, up 8% sequentially from July's $147.9 billion and up 144.3% year over year from August 2025's $65.4 billion. SIA president and CEO Michael Robbins said the global market grew for the 18th consecutive month in August, with sales into the Americas, the Asia Pacific, and China driving strong and sustained year-to-year growth, and the association projects sales to hit more than $1.6 trillion by the end of 2026. The August figure followed an exceptional first half of 2026, when global semiconductor sales reached $403.3 billion in the second quarter and $298.5 billion in the first quarter, representing sequential increases of 33.1% and 25%, respectively. Against that backdrop, Zacks named four chip stocks with upside: Taiwan Semiconductor Manufacturing Company Limited, Analog Devices, NVIDIA Corporation and MACOM Technology Solutions Holdings, Inc.

Aehr Test Systems has received approximately $6M in follow-on production orders from its lead hyperscale customer for package-level burn-in of that customer's next-generation AI processor. The orders cover additional Sonoma high-power test and burn-in systems, turnkey burn-in modules, device-specific sockets and software enhancements. The equipment will be deployed at an OSAT partner in Taiwan, with deliveries scheduled over the next six months.

Citi analyst Atif Malik raised his earnings estimates for Taiwan Semiconductor for the next two fiscal years, writing that another round of consensus earnings upgrades is likely to come for the chipmaker. Malik expects more than 40% year-over-year revenue growth for TSMC into 2027, supported by robust AI compute demand, potential upside from agentic AI, and the new networking cycle of co-packaged optics, or CPO. He also expects TSMC's AI revenue growth to nearly double next year, noting that Nvidia, TSMC's largest customer, has guided to a doubling of its order intake and over 70% year-over-year revenue growth in fiscal 2028, while AMD has guided to over 80% CAGR in its Data Center AI business and Broadcom expects its AI semiconductor revenue to almost double in fiscal 2028. Taiwan Semiconductor shares hit a record high this week and are up 61% year to date, with the company set to report earnings on Oct. 15.

Taiwan's stock market is emerging as a more compelling choice than South Korea's for investors looking to ride the artificial intelligence wave in the final stretch of 2026, after growth in the AI industry began spreading from chipmakers to other businesses across the supply chain. Taiwan's Taiex index has jumped roughly 72% since the start of 2026, the highest among more than 90 global equity indexes tracked by Bloomberg, while South Korea's KOSPI has gained about 63%, ranking second. In the third quarter, the Taiex outperformed the KOSPI by about 23 percentage points, the widest gap since the early 2000s, and earnings estimate upgrades for Taiwanese listed companies outpaced South Korea's for the first time since March 2025. Earnings estimates for companies in the Taiex were revised up by about 19% in the quarter ending in September, compared with an increase of about 15% for KOSPI companies. A Bank of America fund manager survey in September found that about 40% of respondents said they were overweight Taiwanese stocks relative to the benchmark, compared with 25% who held the same view on South Korean stocks. In the survey of 87 fund managers overseeing a combined 211 billion dollars in assets, 35% said Taiwan would be the Asian stock market to benefit most from AI going forward, while only 5% chose South Korea. A key factor is Taiwan's industrial structure, which is linked to the AI supply chain at many levels, from semiconductor design and manufacturing to chip packaging, networking systems and servers. South Korea's market, by contrast, still relies on just a few large chipmakers, particularly Samsung Electronics and SK Hynix, which fell between 19% and 33% in the three months ending in September after six straight quarters of gains. Societe Generale continues to favour Taiwanese stocks over South Korean ones, expecting the rise in memory chip prices to slow over the coming quarters before returning to normal in 2028 amid growing competition from Chinese producers. However, Peter Lee, a managing director at Citigroup, believes investors should start accumulating shares such as Samsung and SK Hynix, because the market may be underestimating demand for high-bandwidth memory chips, or HBM, in 2027. On valuations, Taiwan's market trades at about 18 times forward 12-month earnings estimates, above the KOSPI's roughly 5.5 times. And Taiwan's rally is not confined to Taiwan Semiconductor Manufacturing Co. alone. TSMC shares rose 2.9% in the quarter ending in September, their sixth straight quarterly gain, while about 10% of stocks in the Taiex have at least doubled since the start of the year, compared with just 4.1% of KOSPI stocks and 5.7% of stocks in Japan's Nikkei 225.