KGI Securities: AI Drives Continued Long-Term Strength in Taiwan Stocks, Analysis of Four Key Investment Themes for the Second Half of the Year: "Silicon, Electricity, Light, Heat"

On July 6, 2026, KGI Securities today released its latest analysis of the Taiwan market.

Driven by continuous inflows of hot money and the strong explosion of the AI industry, the Taiwan stock market has seen its biggest gain of up to 60% so far this year. This round of rally mainly stems from the substantial increase in capital expenditure by major US AI cloud service providers (CSPs) to a year-on-year growth of 70%, which has also led to significant upward revisions in the earnings of Taiwanese companies, the main AI supply chain. Consequently, the corporate earnings growth forecast for the Taiwan stock market this year has been raised from the initial 20% to 40%, indicating that the market rally is driven by solid fundamentals. Looking ahead to the second half of the year, this wave of AI is not a short-term issue but a major technological development with a golden age lasting a decade, much like the personal computer 40 years ago and the smartphone 20 years ago. Therefore, the momentum is expected to remain strong. It is recommended to focus on the four key trends of "Silicon, Electricity, Light, and Heat," ranging from semiconductors, power and energy, optical communications to cooling and hardware upgrades, which will become the new growth engine for the Taiwan stock market.

In addition to the increased capital expenditure by large cloud service providers, it is also observed that the annualized revenue of the purest large US AI company, Anthropic, has surged 15 times in the past year, indicating the explosive demand for AI computing power and the rapid expansion of AI applications. These are gradually extending from the cloud to physical scenarios, developing agentic AI that helps improve work efficiency and business results, driving exponential growth in computing demand. The AI business opportunities have expanded from core chips to infrastructure and further to more peripheral applications and the supply chain, thus leading to continued growth in orders and profits for related companies. Investment opportunities worth watching in the second half of the year can be locked in on the four keywords: "Silicon, Electricity, Light, and Heat." Among them, "Silicon" refers to the continuous expansion of demand for AI chips and advanced packaging, driving supply chain growth; "Electricity" is due to the high energy consumption of AI pushing up power demand, becoming a key factor in industry competition; "Light" focuses on high-speed transmission needs, driving the development of optical communications and CPO technology; "Heat" is driven by the upgrade of AI servers, leading to an explosion in demand for liquid cooling and heat dissipation. These four trends together constitute the wave of AI infrastructure upgrade and have become a major market focus.

Furthermore, investors should pay attention to potential issues that could affect the stock market in the second half of the year, including a technical deviation of up to 50% from the annual moving average after excessive gains, concerns about rising inflation leading to interest rate hikes affecting the stock market, and changes such as yield issues or supply shortages arising from the generational shift in new-generation AI chips. Although the aforementioned issues may affect investment sentiment in the third quarter and impact the stock market, they are all short-term disturbances. Even if the market adjusts, it will not be a significant correction and will not affect the positive trend of the stock market. The second half of the year will gradually reflect the still excellent growth of corporate earnings in 2027, and the US midterm elections at the end of the year will usher in a quite positive presidential election cycle for US stocks, which will also benefit the performance of the Taiwan stock market.

Source: KGI Securities