UBS: Taiwan Equity Strategy 2026 — Still Finding Opportunities Post the Two-Year Rally
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Key Views
The market is shifting from valuation re-rating to execution-driven earnings growth, with growth and momentum factors expected to keep outperforming in 2026. UBS projects tech-sector earnings growth of 36% and non-tech growth of 26%. AI capex remains robust, underpinned by strong cloud-service-provider sales and cash-flow generation. Compute supply stays tight, supporting component pricing. However, tech earnings revisions stabilized in December after a sharp October upgrade cycle. Further re-rating requires evidence of hyperscaler growth, model scaling, Blackwell compute monetization, and new product designs potentially around Computex.
Outlook
UBS favors a balanced portfolio of structural AI beneficiaries (semiconductors, hardware) alongside new-tech and product suppliers. It is constructive on component names (Delta, Genius, Jentech) and Silergy, and prefers financials and consumer plays such as Eclat for cyclical recovery. Sentiment shows rising bullish interest in tech cyclicals (ASE, Vanguard) but growing bearish interest in AI small-caps like Jentech. Key risks include AI capex deceleration, demand shortfalls, and valuation correction.
Recommended Securities
Top longs include Chunghwa Telecom, KGI Financial, and Yuanta Financial. Top shorts include Largan, Nienmade, and Feng Tay.