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Taiwan’s stock market rally is expected to extend into 2026, supported by robust earnings momentum from the booming artificial intelligence (AI) supply chain, according to a new research note from UBS. The Taiwan Weighted Index (Taiex) recently surged past the 28,000 mark, hitting record highs as profit expectations and semiconductor investments continue to climb.
UBS projects the Taiex could reach 23,840 in 2025 and climb further to 29,023 by the end of 2026, driven by an estimated 19% earnings growth next year. Despite ongoing debate over whether the AI sector is in a bubble, UBS believes the Taiex’s premium valuation—19 times 2026 earnings—is justified by strong profit growth of around 20% across its coverage universe.
The report noted that further earnings upgrades may be possible if Taiwan’s AI supply chain successfully executes new product launches and monetizes its substantial capital investments. UBS remains optimistic about Taiwan’s leading role in the global AI and semiconductor ecosystem but advises investors to maintain diversified portfolios to manage potential volatility.
Highlighting key investment opportunities, UBS pointed to automation leader Advantech (TW:2395) as a prime beneficiary of smart manufacturing trends. In consumer technology, United Microelectronics Corporation (UMC) (TW:2303) and LARGAN Precision (TW:3008) were cited for their growth potential. The bank also sees value in high-dividend stocks, anticipating seasonal strength through the first half of 2026.
Among UBS’s top picks, UMC and Advantech were added to its most-preferred list, while E.SUN Financial (TW:2884) was removed due to concerns over capital management. On the least-preferred list, Compal Electronics (TW:2324) and Asustek Computer (TW:2357) were downgraded amid expectations of muted notebook demand and a normalization in gaming hardware sales after a strong 2024.
UBS added that rising capital expenditures across the tech sector could fuel credit demand, offering additional support to Taiwan’s financial institutions as the AI-driven rally continues.
