Taiwan stock market faces volatility amid foreign outflows and AI sector shifts

The Taiwan stock market is experiencing volatility as foreign investors have net sold over NT$2.28 trillion this year through July. Despite this significant outflow, market stability is being supported by inflows into both active and passive ETFs, as well as domestic capital.

Analysts suggest the market is in a repricing phase influenced by AI development rhythms and US Federal Reserve policies. While technical indicators show pressure from monthly and quarterly moving averages, long-term investment sentiment remains driven by the AI sector. Capital expenditure by major US cloud service providers is expected to continue growing, potentially reaching nearly $970 billion by 2027, which supports demand for the AI supply chain.

Investment experts recommend focusing on sectors with high earnings visibility, such as ABF substrates, mature semiconductor processes, silicon wafers, advanced packaging, and high-speed transmission. However, caution is advised as current market valuations, including price-to-earnings and price-to-book ratios, are currently higher than the 10-year average.