Local fund managers say they are not worried about an AI bubble, as company earnings continue to grow. Taiwan’s price-to-earnings ratio remains below that of major global indexes such as the Nasdaq and the Nikkei, meaning the rally has not made stocks excessively expensive. Taiwan’s solid semiconductor ecosystem, along with the large volume of orders from global tech companies, continues to support confidence in future growth. Although foreign investors have sold billions of Taiwanese shares due to global uncertainty and profit-taking, sentiment within Taiwan remains optimistic. Analysts expect major cloud and AI companies to increase investment in 2026 and 2027, which could push the market even higher. Many portfolio managers agree that Taiwan’s connection to TSMC and its local suppliers gives it an advantage that is extremely difficult for other countries to replicate.

In the United States, the Dow Jones and S&P 500 reached new highs after the Federal Reserve cut interest rates again. Oracle’s weak results raised doubts about how quickly tech companies can benefit from AI-related spending, prompting investors to move money out of high-growth tech stocks and into companies that gain more from a strong economy. Nvidia, Broadcom, and other AI names declined, while consumer and cyclical stocks climbed.

Smaller companies also rallied strongly, as they tend to benefit more from lower interest rates. The Russell 2000 reached new records, joining the Dow Jones and the S&P 500 in reacting positively to the Fed’s decision. Analysts believe the traditional year-end “Santa Claus rally” could continue and may even push the S&P 500 above 7,000 points. However, some experts warn that 2026 may bring pressure, with a new Fed chair, U.S. midterm elections, and challenges in the AI sector creating possible risks.

Even after years of strong gains, many analysts say the market may be underestimating certain risks. If the AI momentum slows, other sectors will need to work harder to keep markets rising. This has created a more cautious environment, especially after such a long bull market. Taiwan remains a long-term winner thanks to its essential role in the global chip supply chain, backed by stable earnings and strong structural demand. In contrast, the U.S. is experiencing a rotation as investors look for value and stability outside high-growth AI stocks.

For long-term investors, a balanced approach may be the best strategy: first, consider exposure to Taiwan’s semiconductor sector, which continues to benefit from global AI demand. Second, watch the rotation happening in the U.S., as lower-risk sectors may perform well while the tech industry adjusts to slower short-term profitability.