Artificial intelligence (AI) is now said to be fundamentally reshaping digital economies across global jurisdictions. South Korea and Taiwan have emerged as hubs driving tech advancements and market gains in the semiconductor and broader AI ecosystem. According to the latest Citi Research, AI-fueled demand has delivered steady earnings growth and stock market outperformance in these particular regions, especially in semiconductors and AI infrastructure components.
This momentum reflects a structural, multi-year shift propelled by sustained capital expenditures from major hyperscalers such as Microsoft, Google, Amazon, and Meta.
Taiwan’s technology sector stands out as a prime beneficiary. Its benchmark stock index has surged over 50% year-to-date, elevating the market to the world’s fifth-largest by capitalization.
While TSMC garners significant attention for advanced chip manufacturing, the AI build-out extends far beyond semiconductors.
Key contributors include rack assemblies, power delivery systems, thermal management solutions, networking equipment, and PCB substrates—essential for scaling hyperscale data centers.
Citi analysts anticipate hyperscaler capex growing at a robust 46% compound annual rate, with demand for advanced nodes (such as 3-nanometer processes) and higher average selling prices (ASPs) supporting further upside.
Migration to cutting-edge technologies, combined with rising power and thermal demands per AI generation, creates capacity bottlenecks that favor premium pricing and strong utilization rates.
This expansion is not without challenges. Geopolitical considerations are prompting diversification, with firms like TSMC establishing facilities in Arizona and Japan, and downstream players such as Foxconn and Quanta shifting production toward the US and Mexico.
While this introduces execution risks and potential margin pressure, hyperscalers’ willingness to pay premiums for reliable, long-cycle supply differentiates AI infrastructure from more price-sensitive consumer electronics.
Taiwan is also advancing in physical AI applications, including industrial robotics and digital twins for manufacturing efficiency, leveraging its expertise in precision production.
In South Korea, a solid recovery in memory chip earnings—fueled by AI inference needs—has lifted the broader market.
The key-value (KV) cache, which acts as short-term memory for large language models during response generation, drives explosive demand for high-bandwidth DRAM and NAND.
This creates a virtuous cycle of growing data requirements. Citi experts liken the current cycle to early innings of a prolonged game, projecting potential sustainability for another seven years, drawing parallels to historical NAND supercycles from the early 2000s.
Government initiatives like the Corporate Value-Up Program further bolster investor sentiment through improved governance and shareholder returns.
Insights from consultancies and Big 4 auditing and professional services firms now seem to reinforce this optimism while highlighting execution nuances.
PwC‘s 29th Global CEO Survey reveals Asia Pacific CEOs outperforming global peers, with 39% reporting AI-driven revenue gains (versus 30% globally) and notable cost reductions among those with strong foundational capabilities in data, talent, and responsible AI practices.
Deloitte notes accelerating enterprise adoption, with Asia Pacific leading in physical AI implementation, projecting widespread scaling within two years.
Accenture‘s Technology Vision 2025 emphasizes autonomous AI agents and trust as critical for enterprise flexibility and innovation.
EY and PitchBook data underscore steady venture and M&A activity in AI services, with Asia-Pacific projected for the fastest growth in AI consulting through 2030, supported by digital transformation in key economies.
However, reports caution that benefits remain somewhat uneven for now at least; many organizations see limited ROI without mature foundations, and risks such as traditional IT demand weakness, geopolitical tensions, and energy constraints warrant monitoring.
Korea and Taiwan’s strategic positions in the AI supply chain position them for sustained growth in these sectors.
Investors should watch capex trajectories, adoption breadth, and risk mitigation efforts. As these hubs aim to deliver on the so-called promise of transformative digital technology, they appear to exemplify Asia’s key role in the global AI adoption race.
