Asia's AI-heavy markets had a roller-coaster week, swinging from selloff to rallies as the Middle East conflict reverberated across asset classes.

Investors piled into markets like South Korea last year to get exposure to the data-center and chip-making boom, but bouts of excess volatility are resurfacing anxieties about betting on AI.

Here's what analysts and industry insiders are saying about the latest market action in Asia:


Q: Why were markets like South Korea, Taiwan and Hong Kong most affected by this week's rout?

The Middle East conflict has turned into an energy-and-inflation shock, said Saxo Markets' chief investment strategist, Charu Chanana. "And that is the kind of macro backdrop that usually hurts high-valuation, AI-heavy markets first. When oil jumps and uncertainty rises, investors reduce risk quickly, and they often start by selling the biggest and most liquid tech names in South Korea, Taiwan and Hong Kong."

Markets in Korea, Taiwan and Hong Kong all ended lower this week. The Kospi shed 11%, Taiwan's Taiex declined 5.1% and Hong Kong's Hang Seng Index lost over 3%.


Q: Does the selloff create a dip-buying opportunity?

South Korean equities look more attractive following the market's historic 20% correction, said UBS Global Wealth Management's chief investment office. "Memory prices remain elevated amid ongoing supply shortages, supporting robust earnings growth for South Korea's memory and semiconductor leaders," it said.

The drop in Korean equities will likely be followed by a recovery to new highs after period of consolidation, Goldman Sachs analysts said. They revise their 2026 Korea earnings growth forecast to 130% from 120% given its memory producers' high operating leverage, they said.


Q: Will a prolonged conflict weigh on global AI investment?

CGS International Securities CEO Carol Fong reckons that investment may slow but it won't stop. "In fact it's only the start of a big wave that we will continue to see for many years as we have seen the potential of AI to transform the global economy and markets," she said.

Saxo's Chanana said that a sustained conflict does not automatically mean that global AI investment will collapse, though it can change the tone, pushing companies to spend more carefully, especially if higher energy costs and tighter financial conditions squeeze margins.

Marco Barresi, senior tech analyst at Lombard Odier, doesn't expect to see a change in AI spending in the near term, as the planning is far too complex to be modified rapidly. "If we were to see supply-chain disruptions, and/or a prolonged regional war with an oil shock, this might hamper sentiment and so delay projects and push companies to temporarily pause or slow their 2026 spending. But this is not our base case scenario," he said.


Q: What parts of the AI supply chain could be more resilient amid volatility?

In risk-off periods, it could be preferable to look at sectors within the AI universe that have stronger pricing power and clearer cashflow visibility, Saxo's Chanana said. "[Investors] become less forgiving of anything that looks like speculative capacity build or weak monetization."

As the AI theme broadens from a narrow focus on the major tech leaders to a wide range of industries, the companies like hardware makers that are participating in the global AI infrastructure buildout could see more predictable returns at this stage, said Fong at CGS International Securities.


Write to Sherry Qin at sherry.qin@wsj.com


(END) Dow Jones Newswires

03-06-26 0340ET