Asia’s Chip Stocks Set Records. Where Do We Go From Here?
The strong showing of East Asian equities stems from gains in memory stocks, as well as cheap currencies. What will the second half bring?
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It’s been the strongest quarter in history for semiconductor stocks. That helps explains Asia’s stock-market winners for the first half of the year, as we close out the second quarter.
South Korea’s stock market has led the world’s markets, with the Kospi ending June 30 on a 101.1% gain. That performance has helped memory-chip makers Samsung Electronics (KR:005930) and SK Hynix (HXSCL) (KR:000660) well past $1 trillion in market capitalization.
It also explains the strong showing in Taiwan, where the benchmark Taiex is up 59.3% for the first six months. Taiwan Semiconductor Manufacturing Co. (TSM) (TW:2330) helped power that performance with a 55.5% advance.
Should Investors Chase Chip Gains?
It also leaves investors in a quandary. Should they chase toppy-looking chip stocks via vehicles such as the Roundhill Memory ETF (DRAM), where just three stocks – Samsung, Hynix and Micron Technology (MU) – make up 73.0% of the exposure? Or is it time to diversify away from the hottest sector?
I hold DRAM. But we see highly unusual volatility in the Korean market in particular, with daily moves of 5% or more far from unusual, in either direction. There’s the opportunity to trade in and out of that, capitalizing on the fluctuations in Samsung, Hynix and Micron.
Outside Korea and Taiwan, the next-best showing has come from the Nikkei 225 in Tokyo. It ends the quarter up 39.1% on the year.
Chip plays have helped propel that rise, too. My stock pick from Asia for this year, chip-testing equipment maker Advantest (ATEYY), (T:6857) has performed exceptionally, up 64.7% year to date. Like TSMC, Advantest is fairly agnostic as to which customers and companies are making the chips, so long as production continues.
SoftBank Selloff This Month
But it only takes a slight sales disappointment to send memory-linked stocks south. Earlier this month, I explained in a column that SoftBank Group (SSFTBY) (T:9984) had eclipsed Toyota Motor (TM) (T:7203) as the largest company in Japan by market capitalization.
SoftBank, with $64.6 billion committed to OpenAI, has had a torrid June, with SoftBank shares sinking 30.2% since the close on June 1. Not only is OpenAI reportedly pushing its stock offering into next year, but its 87.1% stake in Arm Holdings (ARM) has sunk 13.7%. The British chip designer’s shares headed south after a disappointing sales forecast from its customer Broadcom (AVGO) sent Broadcom shares south to the tune of 22.2% in June.
Former Toshiba Unit Soars
Flash-memory maker Kioxia Holdings (KXIAY) (T:285A) has risen to take its place. Kioxia, formed out of the memory operations of Toshiba, was taken public once again by Bain Capital in December 2024. Its shares are up a whopping 759.4% so far in 2026, thanks to demand for its NAND flash memory chips in data centers used to power Artificial Intelligence (AI).
That has propelled Kioxia to a $302.1 billion valuation, similar to Netflix (NFLX) or Goldman Sachs (GS). But the Japanese company remains a fraction of the size of TSMC ($2.4 trillion), Samsung ($1.4 trillion) or Hynix ($1.2 trillion), which are all now among the top 15 companies in the world in terms of market cap.
They have all eclipsed entertainment group and WeChat app operator Tencent Holdings (TCEHY), which with a $494.3 billion market cap used to be Asia’s largest company. Chinese and Hong Kong stocks have suffered in 2026 and can be considered some of the largest losers.
Hong Kong Stocks Suffer Capital Controls
The Hang Seng in Hong Kong is down 10.7% year to date. China has been clamping down on the international outflows of capital, as I explained on June 4 with its attempts to stop Chinese customers opening overseas financial accounts, as well as China’s crackdown on brokerages allowing Chinese investors to access international markets.
That’s why the H share market in Hong Kong has suffered a 15.2% descent in 2026, while the Shanghai composite in mainland China remains 3.2% higher on the year. The Shenzhen composite, tracking the tech-heavy Shenzhen market, is up 12.2% as Chinese AI companies offer cheaper computing power than their counterparts in the West.
Indonesia Awaits Index Decision
Besides Hong Kong, the other main underperformers in Asia are Indonesian stocks, with the Jakarta benchmark down a massive 34.7%, and Indian markets, with the Sensex down 10.3% for the first six months of the year, and the Sensex down 8.4%.
Indonesia faces a potentially devastating downgrade to frontier-market status by index provider MSCI. That would force emerging-market funds and investors to sell down or out of Jakarta-listed stocks, in keeping with their investment mandate.
While market watchers expect MSCI ultimately to retain Indonesia’s emerging-market status, they are not encouraged by the political meddling and cronyism of Indonesian President Prabowo Subianto. He’s the ultimate political insider, as a former head of the armed forces and the son-in-law of former dictator Suharto (although estranged from his wife).
MSCI and other index providers are concerned about the lack of transparency in the Indonesian stock market, as well as the low level of free float among companies. Jakarta announced an increase in the free-float requirement from 7.5% to 15.0%, but MSCI wants to see more progress on that front. A dark cloud still hovers over the Indonesian market after MSCI pushed its decision back to November.
Weak Yen Continues. Will We See ¥165 Next?
The very weak Japanese yen has also been another key story of 2026. The Japanese currency has now softened to its weakest levels against the U.S. dollar in almost 40 years. It is changing hands at ¥162.44 as I write, the first time it has traded at such levels since December 1986.
The Japanese government appeared set to defend the “red line” of ¥162, and intervened in April and May when the currency crossed ¥160. But the effects of the costly move, with the equivalent of $72.4 billion spent to defend the currency, are inevitably short-lived.
The central Bank of Japan raised rates in mid-June to their highest levels in 31 years, of “around 1.0%.” As I outlined at the time of the decision, rates were last that high in August 1995, as Japan’s asset bubble was deflating.
But that nevertheless leaves them the lowest in the G7 group of major economies, significantly lower than the 3.50% to 3.75% in the United States, 3.75% in the United Kingdom, and 2.40% for the European Union.
Japan is also not raising rates quickly, with five small hikes since March 2024. Japanese Prime Minister Sanae favors stimulatory policies and cheaper borrowing costs, neither of which suggests much support for the yen.
The pressures are, though, mainly external. The U.S. Federal Reserve sounded hawkish at its last meeting, and there’s speculation a strong U.S. jobs report on Thursday could even push the yen near ¥165.
Most Asian currencies have lost significant ground to the U.S. dollar, with the Korean won at a 17-year low, this month breaking through the 1,5550 level to the U.S. dollar. It last tested such levels briefly in March 2009, during the Global Financial Crisis, and before that back in 1998. The Indonesian rupiah, Thai baht and Philippines peso have all also declined against the U.S. dollar this year.
There’s no sign the currency weakness will ease over the second half of this year. But we have seen exceptionally choppy trading in the high-priced chip stocks. As we saw when Broadcom’s disappointing numbers caused a slump in Arm and SoftBank, all it takes is one weak set of numbers from a major memory player to trigger a selloff.
At the time of publication, McMillan was long DRAM and TSM.
