The collapse of the US stock market triggers a chain reaction in the Taiwan stock market, with the AI sector facing a valuation re-evaluation watershed

Yesterday, the Taipei stock market experienced a shocking decline, linked to the previous sharp drop in US tech stocks. The weighted index opened with a gap down, falling as deep as 27,684 points, with a single-day fluctuation exceeding 500 points, officially breaking below the psychological level of 28,000 points. The stock king, Xin Hua, became a battleground between bulls and bears around NT$6,600, while TSMC plummeted by NT$30 at the open to around NT$1,450. Behind this chain reaction not only reflects a short-term technical collapse but also exposes the pricing distortion issues during over a year of AI frenzy.

Why Is the Chain Reaction of the US Stock Market Crash So Intense?

Last Friday, the four major US stock indices all closed lower, directly triggering the decline in the Taiwan stock market yesterday. Among them, Broadcom dropped 11.43% in one day, and NVIDIA fell more than 3%. The simultaneous decline of these chip giants sent a warning signal to the market. Leading stocks in Taiwan, including TSMC, MediaTek, and Hon Hai, all fell sharply, maintaining their status as the hardest-hit electronic sector. AI concept stocks such as Quanta, Wistron, and Inventec briefly fell more than 1% during the session but later stabilized.

Interestingly, many retail and institutional investors almost simultaneously called for buying the dip when they saw TSMC plunge, implying that market confidence in Taiwan stock fundamentals has not been completely shaken. This “buying on the dip” phenomenon reflects investors’ recognition that this round of decline is more of a technical correction rather than a deterioration of fundamentals.

Collective Weakness of the Million-Dollar Stocks, but Stock Differentiation Shows Bright Spots

The most notable phenomenon of the day was that almost all of the “million-dollar” stocks above NT$3,000 turned from red to black, creating a scene rarely seen in recent years. However, against the backdrop of the market decline, Jingce Technology surged over 8%, reaching a new high of NT$2,370, becoming one of the few bright spots.

Jingce’s popularity is mainly due to its benefit from the upcoming demand surge for next-generation smartphones and high-end tablets. Its consolidated revenue for the first 11 months reached NT$4.415 billion, up nearly 40% year-on-year, enough to support market expectations. Meanwhile, the stock king Xin Hua briefly dipped to NT$6,590 today but was met with support, turning positive at midday. The balanced performance of bulls and bears indicates that although there is short-term panic, investors still maintain a defensive stance toward quality stocks.

Broadcom’s $73 Billion Orders Are Met with Stock Price Crash; Pricing Logic Is Shifting

The core issue is this: Broadcom’s financial report clearly states that AI-related orders in the next 18 months have exceeded $73 billion, setting a new high. Why, then, did the stock price suffer a heavy hit? The answer points to a deep “rational re-pricing” process in the market.

Over the past 24 months, the logic driving the AI sector’s rise was simple and crude—label anything as AI and claim order growth to gain valuation premiums. But as key signals from giants like Oracle and Broadcom emerged in their financial reports, investors’ perspectives are shifting: from chasing growth scale to scrutinizing profit quality, investment return cycles, and order realization certainty.

The fact that Broadcom’s stock was not quickly bought up after earnings is the most obvious sign of this shift. The company explicitly emphasizes transitioning from “selling high-margin chips” to “selling system solutions.” Among Oracle’s $523 billion in orders, $300 billion come from OpenAI, but Wall Street is raising sharp questions: can these huge orders truly translate into real, high profits?

Capital Flows Reveal the Market’s True Attitude

Intraday capital flow data reveal a key message: funds are not fleeing the market recklessly but are undergoing precise structural adjustments. Electric, oil, and gas stocks performed the strongest, rising 3.09%; networking and shipping stocks increased by 1.33% and 1.25%, respectively. Conversely, glass stocks fell 2.59%, other electronics stocks declined 2.15%, and semiconductor stocks dropped 1.8%.

This capital movement reflects that investors are withdrawing from overly crowded AI midstream supporting sectors and shifting toward assets with transparent cash flows, valuations not excessively inflated, and less sensitivity to rate hikes. In other words, funds are not denying the prospects of the AI industry but are seeking more certain value anchors amid the differentiation within the AI supply chain.

Year-End Three Major Tests Converge, Market Faces Complex Battles

Taiwan stocks are currently under three simultaneous pressures. First, the movement of US stock indices and the direct impact of foreign capital on Taiwan stocks; second, the potential selling pressure from the upcoming implementation of the “IFRS 17” system for life insurance companies in 2025; third, the possible exit of interest rate spread trades triggered by the Bank of Japan’s rate hike of one basis point during this week’s “Super Central Bank Week.”

Particularly noteworthy is the transition in the life insurance sector. After aligning IFRS 17 with TW-ICS, if stocks are classified as FVOCI, future gains from disposals cannot be recognized in profit and loss but only in capital reserves. This effectively cuts off the traditional practice of using stock disposals to enhance EPS and distributable earnings. Life insurers are rushing to realize unrealized gains on their books before the system switch.

The Divergence After the US Stock Market Crash Is Inevitable

Companies deeply tied to OpenAI, including Oracle, SoftBank, Microsoft, and NVIDIA, have collectively seen significant stock declines since late October, exposing industry chain concentration risks. Oracle’s new co-CEO attempts to reassure the market, claiming the company has over 700 AI clients and that even if OpenAI defaults, infrastructure can be reallocated within hours, indirectly admitting concerns that OpenAI might not absorb all orders.

In contrast, Google controls the most scarce resource in OpenAI—healthy cash flow and a complete industry ecosystem. Google expects its capital expenditure in 2026 to account for 56% of operating cash flow, making it the most efficient among tech giants. Its vertical integration offers significant cost advantages; for example, TPUv7’s total cost of ownership is about 44% lower than NVIDIA’s GB200 servers.

From Bubble Burst to Market Maturity: An Inevitable Path

From a medium- to long-term perspective, the recent sharp decline in the AI sector is not a bubble burst but a necessary test for market maturity. Future AI sector differentiation will become normal; companies relying solely on “AI concepts,” with single customer structures and lacking profitability support, will face continuous valuation compression. Conversely, high-quality stocks with core technological competitiveness, stable profitability, diversified customer bases, and clear growth paths will stand out in market selection.

Although the US stock crash has temporarily intensified market volatility, for long-term investors, it provides a window to reassess stock quality and identify certain opportunities. The true meaning of this adjustment is to guide the market from speculative hype back to rational evaluation of industry fundamentals, corporate profitability, and cash flow creation.