Investors Fear Asia’s Heavy Reliance on Tech Stocks Could Expose Markets if U.S. AI Boom Fades
Investors are increasingly concerned that Asia’s heavy dependence on technology stocks could make its equity markets vulnerable if the artificial intelligence (AI) boom in the United States loses momentum.
Large technology companies have driven roughly half the gains in several major Asian stock indices this year, sparking worries that America’s AI investment frenzy is inflating a “bubble” in stock markets across other regions.
According to Financial Times calculations, six technology firms that have benefited from the AI surge — including e-commerce giant Alibaba, smartphone maker Xiaomi, and video-sharing app Kuaishou — accounted for 50% of the Hang Seng Index’s gains in Hong Kong this year.
In South Korea, Samsung Electronics and SK Hynix contributed 40% of the Kospi’s rise. Meanwhile, in Taiwan, shares of chipmaker TSMC made up more than half the increase in the TSEC 50 Index.
With market strength depending heavily on a small cluster of high-valuation tech stocks, analysts warn that regional equities could easily slide if the U.S. AI sector slows down.
“If an AI bubble bursts in the U.S., it will also burst in Asia,”
said Frank Benzimra, Head of Asia Equity Strategy at Société Générale.
According to First Trust Economics, the “Magnificent Seven” tech stocks in the U.S. contributed 42% of the S&P 500’s gains in the first three quarters of 2025.
Much of the investor excitement around AI in Asia has focused on companies in the semiconductor design and supply chain, as well as chipmakers whose products train and run advanced AI models — including TSMC and Japan’s Tokyo Electron.
Valuations of AI-related stocks have soared, particularly in China. Shares of Cambricon Technologies, a Shanghai-listed chipmaker, are trading at a price-to-earnings (P/E) ratio of 506.2, while its rival SMIC trades at a P/E of 221.3.
By comparison, Nvidia’s P/E ratio stands at 57.7, and that of TSMC, the world’s largest contract chip manufacturer, is only 24.7.
“If the U.S. tech sector declines, Asian stocks will fall too. Fundamentally, that’s dependence,”
said Alicia García-Herrero, Chief Asia-Pacific Economist at Natixis.
However, some investors argue that the rapid growth of China’s emerging tech sector cannot be properly assessed through traditional valuation metrics alone.
“It’s difficult to accurately value these new tech firms using only P/E ratios. Companies like Cambricon are growing their profits exponentially,”
said Hao Hong, Chief Investment Officer at Lotus Asset Management.
Although share prices of some chipmakers have surged dramatically this year — Samsung Electronics has more than doubled, while SK Hynix is up about 250% — several experts believe this momentum is structural rather than speculative. The two stocks account for 18.2% and 11.7%, respectively, of the Kospi Index.
Stephen Yiu, founder and Chief Investment Officer at Blue Whale Capital, predicts that demand for data storage and memory chips will remain extremely strong.
“We believe this represents a major refresh cycle in data storage technology. It suggests that the chip industry is entering a supercycle,” Yiu said.
While some Chinese tech stocks trade at much higher valuations than their U.S. counterparts, overall Asian tech valuations remain lower. For instance, the Nasdaq 100 Index in the U.S. trades at a 12-month forward P/E of 35, compared with 20 for Hong Kong’s Hang Seng Tech Index.
“Valuations in parts of the U.S. tech sector are stretched, reflecting high expectations for AI monetization,”
said Charlie Linton, former Asia-Pacific portfolio manager at Ninety One.
However, he noted that Asian tech stocks overall are trading at reasonable levels, supported by profit growth and strong balance sheets.
The P/E ratios of Chinese tech giants Alibaba and Tencent remain lower than those of U.S. peers such as Amazon and Apple. Some experts believe the recent rise in Asian tech stocks reflects the sector’s catch-up phase with Wall Street counterparts.
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