# AI CapEx Surge Reshapes Asia Tech Supply Chains

**Podcast:** Bloomberg Daybreak: Asia Edition
**Published:** 2026-02-05

## Transcript

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Welcome to the Daybreak Asia Podcast.
I'm Doug Chrisner.
Stateside, the rotation out of tech shares gathered momentum on Wednesday.
Software firms were caught in another wave of selling.
The concern here is how AI may disrupt their traditional business models.
But today the bigger losses came among chipmakers.
As one example, advanced micro devices down more than 17%.
That came after an underwhelming outlook.
Then, after the bell, we heard from Alphabet, ARM, and Qualcomm, to name a few, and those shares were in various degrees of retreat in late New York trading.
Now in the Asia Pacific, it's proving to be a kind of a rough start for South Korean equities, and we want to take a closer look now.
Let's bring in Bloomberg's Lianting 2.
She is managing editor for Asian Equities.
Lianting joining from our studios in Singapore.
Help me understand what you're seeing in the South Korean equity market in particular.
I noted that there was a lot of tech weakness over the last 48 hours in the States.
It seems like it's showing up uh in a big way in South Korea.
Yeah, I just want to first mention that South Korea was actually really resilient yesterday when the intensity in the sell-off in software shares was very severe.
And today we're seeing a bit of a pullback in Korean chipmakers.
Part of the reasons just overall, you know, uh sentiment around tech.
As you mentioned, Nasdaq was down.
I think the biggest two-day route since October, and a slew of earnings you just mentioned were not looking too good.
But I guess for South Korea, overall the underlying tone uh of among investors is still quite bullish.
If you look at Qualcomm, uh it did miss estimates, but the the highlight of the earnings call was about a memory chip shortage, right?
It says, especially those uh handset makers in China couldn't get enough memory chips.
So that really adds to the bullishness about uh around these two giant chipmakers in South Korea, Samsung and SK Heinex.
Um we also saw Nintendo yesterday.
Uh shares plunged because you know the memory chip become an a big issue again.
So I I would say overall, yes, the tech names are not doing too well, but the translation to the implication for the two South Korean chipmakers is actually quite positive.
So help me understand this.
If we're talking about potential shortages of components like memory, that is obviously going to drive up memory prices.
And when you're a device maker, you're gonna have to try to make up for that cost, right?
Wouldn't that run the risk of hurting consumer demand if if device prices start to push higher?
Yeah, that's exactly the uh c recalibration that is being done by analysts when they look at these companies like Nintendo, um, like Qualcomm, and like, you know, uh maybe Xiaomi, the biggest uh uh cell phone maker in China.
I think the overall idea is first of all, they may not make as much to make to meet the demand just because they don't have those memory chips.
And second, yes, they will have to pay a lot more to get these chips.
For example, for Nintendo, uh, their current contract covers about one year of memory chip sort of intake.
But after that one year, they'll have to really pay up.
That would eat into their margins.
So overall, that's why the shares were down, I believe, nine percent or so for Nintendo yesterday.
So maybe we can change gears and talk a little bit about Alphabet.
Fourth quarter revenue was above forecast, but the company did say that it plans to spend a lot more than investors had expected this year.
I think CapEx is set to double.
Now that speaks a very strong demand, and I understand we were just talking there about the risk of higher prices for certain components like memory.
But isn't this a positive sign when you have a company like Alphabet saying, hey, our business in AI seems to be working well, and we're gonna increase CapEx?
Yeah, I believe so.
That's why you see, you know, the initial share plunge was I believe seven, eight percent in the post-market trading, but that really rebounded.
I think Alphabet, first of all, first of all, it has a very good track record of really making things work.
A lot of its initiatives in the end took off.
Its Gemini model caught up really quickly to imp you know to be embedded in all sorts of Google offerings, including um the search engine as well.
Um but also I think for um for Asia suppliers, we are, I would say Asia suppliers are actually uh in the very good part of the supply chain because a lot of them are in the hardware business.
You look at the Korean chipmakers, you look at TSMC, you look at a lot of Japan equipment chip equipment makers.
So they are the ones receiving the CapEx uh money from the likes of Google, uh Meta and other hyperscalers in the US.
So I think we that's why we see a lot of analysts actually issuing very bullish calls for for Asia tech names in the broader context of uh global sell-off uh because of AI losers sort of recalibration.
The Asia chipmakers and Asia headway makers are actually quite resilient and will continue to be resilient in the AI trade.
Well, staying with the chip space for a moment, profit for the British chip designer ARM Holdings was down 12 percent.
That's pretty substantial.
And the company sales forecast for the current quarter was disappointing.
This company is owned, ARM by SoftBank, and I'm looking at those shares down more than five percent right now in the Tokyo session.
So there's another level of exposure here.
It's not just ARM, but it extends out to SoftBank, right?
Yeah, SoftBank is an interesting company, right?
It owns um uh a big uh stake in ARM, but it also is a big investor in open AI.
And open AI, as we as I saw in a in a nice story from Bloomberg yesterday, it uh became a bit of a liability for a lot of uh investors, uh early investors in the company, including Nvidia.
The idea is just, you know, questions about whether all these spendings can actually turn into a return fast enough to sustain the operation of this company.
Um so for SoftBank, I think it's uh increasingly been seen as a proxy uh to this open AI or um AI uh large language models, and uh, these are the companies that are sort of uh most in question about the valuation about the bubble concerns.
What about markets in Hong Kong and on Taiwan?
I mean, are they are the stories similar here in terms of the tech uh narrative?
Um Taiwan and Hong Kong, I would say quite different.
Hong Kong is very much centered around Chinese internet names, and that sector has its own dynamics.
Uh part of it is the price war, uh, especially in the e-commerce and food delivery space that has really compressed uh profit margins despite government's effort to uh prevent that.
Uh second is the tax concerns.
Um I'm sure you saw a couple of days ago, a bunch of these internet or platform names dropped uh quite significantly because of concerns that uh the tax man, the Chinese government, which is facing a record uh budget deficit, is potentially adding value-added tax for these group of companies which are perceived to be relatively more profitable than others.
So that's the latest headache for Chinese tech names.
In terms of Taiwan, yes, TSMC again is still very much well positioned in the tech supply chain because you know, all sorts of chipmaking would need to go to TSMC to get that made.
Um the reason for TSMC to underperform these uh Korean chipmakers is because there is a bit of a cap for a lot of uh funds to hold the single a single name.
So TSMC for a lot of EM or Asia focused funds, they have already maxed out the 10% cap.
So now they're scrambling to find other ways to get exposure to TSMC, including using some kind of esoteric swaps or going into the structured products.
So it doesn't quite show up in, you know, the all sorts of disclosures.
So that is sort of the reason that is keeping a little bit of a lit on TF TSMC's share price.
Leon Ting, thank you so very much.
Great stuff from Bloomberg's Leon Ting 2.
She is managing editor for Asian Equities, joining us here on the Daybreak Asia podcast.
I'm Carol Masser.
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I'm Doug Christner.
As I mentioned a moment ago, U.S.
Tech Shares added to their recent weakness during the Wednesday session.
And for some additional perspective, we caught up with Hartmut Isel.
He is the head of APAC Equities and Credit at UBS Wealth Management.
Hartmut spoke with Bloomberg TV host Sherry On and Avril Hong.
Really a lot to digest, but the narrative right now seems to me a continuation of that uh tech rotation out of those stocks and into perhaps more value, more small sectors, more cyclicals.
Is this can this be seen as a positive sign of more broadening out of the market, or is this a fundamental problem?
I think it is uh a sign of uh a broadening uh market.
But we also have to bear in mind, especially if you look at Mac7, for example, right?
Over almost for years, right?
They they were the key component of earnings growth in the SP.
They still are one of the components, but not the only one anymore this year, right?
So it's probably not so surprising that we see um other sectors, maybe I mentioned Bayesian particular, also in the US context, right?
That are also coming up.
And um many investors also see, hey, you know, where else can I diversify things a bit?
So not an unhealthy environment in my view.
Yeah, especially at a time when we saw the sell-off in software stocks when they're actually generating solid earnings.
In this side of uh the world in Asia, are there any concerns around the fact that AI could cannibalize some of these companies that are in play as well?
On the uh Asia side, actually, uh as as long as there's demand for AI, it doesn't matter from whom or if the if the market shares uh shift or anything like that, the market seems to believe uh to some extent in software.
Um in in the stock markets here in APEC, we don't uh have that kind of uh phenomenon or not, not that kind of structure and setup.
And therefore, right, and we have seen also what you mentioned uh alphabet, but we have seen it before also Microsoft, etc.
In terms of what I what I look at, right, is is cloud growth year on year.
It's very, very strong, and and if it disappoints to some extent, then it's only because the capacity isn't there, right?
The demand is is it's not a demand issue, right?
So that I think also here for the for the Asian semiconductor space in particular, right?
Uh as long as that rolls, I don't see so many issues there.
Are you also seeing how emerging markets are sort of breaking away from these US market moves?
Yes, indeed, we uh are seeing it.
Um by the way, not only in APEC, but also in APEC, uh, I should say.
And yes, I I will say, you know, especially if we stay here quickly in our region, right?
There is different um drivers.
I I think quite interesting, right?
So so AI is also one of them, also for APEC, I just mentioned, but then you have value ups, right?
So markets that, you know, in terms of structure don't don't really that close to to AI, right?
But they're going up, like a Japan, like uh Singapore.
And then we have markets that also look interesting, again a different driver, right?
Which I call sort of the laggards of last year, where actually your earnings growth is accelerating.
Two examples, India, Indonesia.
So, yeah, you you know, different drivers.
What could be better?
Talk to us also about what you see in credit that is related to the AI boom, because there also seem to be some lingering concerns about the payoff in that part of investment space.
Is that something that you're also seeing?
Yeah, we have looked at it, especially also on the um non-listed side, right?
The conclusion that we came up with is um probably where you where you have uh more flex uh potentially is is more like the low quality uh areas with which at least as far as our investors go, right?
We have um several times right told them and recommended, right?
So you know you you can go into that space, you should be in that space, but more on the high quality side is that as long as that's the place where you position, that should be okay.
You mentioned Japan earlier, and of course we have seen an amazing rally given some of the structural changes in this market.
We are headed towards the election this weekend, and that's really raising more fiscal concerns about this country.
Um is there anything that you're watching in particular um this weekend that could make a meaningful difference towards uh the direction of uh the equities uh here in Japan?
Yeah, I think generally for the markets, uh I mean, given we we probably know what the outcome or the most most likely outcome is, right?
We we need to watch certainly, right?
That also the government, right?
They they do the stimulation, they they do positive structural measures, but not overdo it uh necessarily on the on a dead side, right?
As long as that's the case, I think it's okay, because that in my view is sort of you know something short term that could help the market.
But if I look back a bit, right, the these uh return on equity uh measures in Japan, they have started to increase.
I think that is a key reason also why why many also foreigners go back, right?
These uh value up measures, they are beginning to work.
We see it in the data, and it will not stop here.
So, yeah, Japan is interesting.
What about Chinese tech, which hasn't actually been immune to the route in the sector that we've been seeing this week.
Yeah.
On Chinese tech, and of course, uh in the in about uh say a month's time, who or half a month, I say, uh we will see more more uh data, also results.
The ones that I would most critically look at is a bit like in the US it with hyperscalers, right?
It's the year on near cloud growth.
So and we have seen, right?
If I compare it to twelve, eighteen months ago, we have seen a significant increase of some of the leaders, right?
We're talking in some cases now about 30 percent give and take, right, or even 30 plus percent year on near cloud growth.
That has only come in recently.
And if you know, nobody has to hide between uh U.S.
uh hyperscalers anymore, right?
It it's it's virtually on par.
And I think you know, we we're gonna see also from here several quarters of this repeating.
So I would struggle to see why the market wouldn't sort of buy into this idea.
That was Hartmood Isel, head of APAC Equities and Credit at UBS Wealth Management, speaking to Bloomberg TV hosts Sherry On and Averyl Hong, bringing you the conversation here on the Daybreak Asia Podcast.
Thanks for listening to today's episode of the Bloomberg Daybreak Asia Edition Podcast.
Each weekday we look at the story shaping markets, finance, and geopolitics in the Asia Pacific.
You can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere else you listen.
Join us again tomorrow for insight on the market moves from Hong Kong to Singapore and Australia.
I'm Doug Chris, and this is Bloomberg.