The AI Boom Is Splitting Asia's Stock Markets: Why Concentration Fell in China, India, and Hong Kong While Taiwan and Korea Surged

For China and Hong Kong specifically, additional forces amplified the de-concentration:

• Mainland Chinese capital flooding into Hong Kong: Mainland investors poured roughly $90 billion into Hong Kong stocks, attracted by cheaper valuations and Hong Kong's role amid intensifying China-US competition .
• A broader Hong Kong rally: Reuters reports this mainland inflow helped propel a sharp rise in Hong Kong shares — gains that were not limited to a single AI-linked champion .
• Different market leadership: The strongest Asian AI-equity impulse, by the available reporting, has been concentrated in Taiwan and South Korea's semiconductor sectors rather than in China, India, or Hong Kong .

For India, the same broad logic applies more cautiously: lacking a small group of AI-semiconductor megacaps comparable to Taiwan and South Korea, top-heavy concentration is less likely to rise for the same AI-related reason .

The AI Boom Drives the Opposite Outcome in Taiwan and South Korea

The same AI boom that left China, India, and Hong Kong without direct megacap support has supercharged market-cap growth in Taiwan and South Korea — the two Asian semiconductor powerhouses most clearly tied to the physical backbone of AI infrastructure .

How it works: The most sophisticated AI memory comes predominantly from South Korea and Taiwan, and rising prices caused by supply constraints have generated substantial wealth in those markets . In 2026, South Korea's stock market approximately doubled, while Taiwan moved past major European markets in global equity rankings . Retail and institutional investors have engaged in record buying, including leveraged positions, to ride the Asian AI semiconductor wave . The result is a much more concentrated rally in the companies that build the chips and memory needed for AI infrastructure .

Broader Implications for Investors

Concentration risk is now geography-specific. The global equity landscape has bifurcated around direct AI-semiconductor exposure .

• Markets with strong AI-exposed megacaps such as Taiwan and South Korea have become more exposed to the fortunes of a small group of semiconductor leaders .
• Markets without comparable AI-semiconductor megacaps may offer a broader base of returns, though they still carry their own country-specific risks.

Portfolio diversification across geographies is no longer just about country risk — it is also about AI exposure risk. An investor heavy in Taiwan and South Korea equities has a large implicit bet on AI semiconductor earnings continuing to grow . An investor seeking to reduce AI concentration might look more closely at markets where the chip-led megacap dynamic is absent, while still accounting for local risks such as regulation, geopolitics, liquidity, and earnings quality.

Valuation dispersion: The gap between AI-linked semiconductor markets and less directly AI-linked markets appears to have widened, creating both opportunity and danger for active managers .

The AI Bubble Debate: Key Positions

The debate over whether AI stocks are in a bubble is active and unresolved, with credible arguments on both sides .

Arguments that AI stocks are in a bubble, or heading toward one:

• Bubble-diagnostic concern: The rapid expansion of AI investment has revived the recurring question of whether AI-related assets are experiencing a bubble or whether markets are pricing a durable technology buildout .
• Valuation and momentum concern: Taiwan and South Korea have become among the world's hottest equity markets because of AI-driven semiconductor earnings, with Korea's Kospi up about 90% in 2026 .
• Overheating concern: Analysts have warned about overheating risks as retail and institutional investors poured into Asian AI-related stocks, including through leveraged investments . South Korea's Kospi more than tripled in less than 18 months, a pace outpacing even the tech-heavy Nasdaq .

Arguments that this is a durable buildout, not a bubble:

• Earnings support: The rally is not based only on narrative; Asian semiconductor manufacturers have reported surging profits tied to AI demand .
• Structural demand: AI may be viewed as a durable general-purpose technology rather than a purely speculative trade, a central possibility examined in the academic bubble-versus-buildout framework .
• Real supply-chain linkage: South Korea and Taiwan are not merely proxy trades; they supply key chips and memory used in AI infrastructure .

Bottom line: The evidence is mixed. Strong semiconductor earnings and real AI infrastructure demand support the "buildout" view . Rapid price gains, concentrated positioning, leveraged buying, and overheating warnings support the "bubble risk" view . The most balanced conclusion is that AI may be a real structural technology while still producing market behavior that requires caution, especially where prices become heavily dependent on a narrow group of AI-chip leaders .

Sources: Data and analysis based on Bloomberg, Reuters, CNBC, BNP Paribas, and academic research available through late June 2026.