Behind the Collapse of the Taiwan Stock Market: The AI Industry's Shift from Pursuing Scale to Focusing on Profitability

Last Friday’s intense volatility in US Tech Stocks triggered a chain reaction, causing the Taiwan stock market to plunge into a crisis at the opening today. The weighted index dropped immediately, with a intraday plunge of over 500 points to 27,684, as electronic blue-chip stocks became the main targets. TSMC ADR fell sharply by 4.2%, with the spot price opening gap down by 30 yuan to 1,450 yuan; the stock king,信驊, saw fierce competition around 6,600 yuan; high-priced stocks above 3,000 yuan almost all faced urgent sell-offs. Behind this stock market crash, is it a bubble burst or a rational transition?

From chasing concepts to examining fundamentals

Broadcom’s earnings report caused a single-day drop of 11.43%, while NVIDIA declined over 3%. The seemingly shocking decline conceals a deeper market logic shift.

Over the past two years, AI concepts have become the universal key to soaring valuations—any connection to AI could garner huge premiums. But now, the market is questioning this logic. Broadcom explicitly stated that its transition is from “selling high-margin chips” to “selling systems,” exposing the real issue: a huge gap between order volume and actual profit.

Oracle holds $523 billion in orders, of which $300 billion come from OpenAI, raising market doubts—can these orders truly translate into high profits? The long payback cycle and lower-than-expected profit margins put companies deeply tied to OpenAI at risk. Tech giants like NVIDIA, Microsoft, and SoftBank have been collectively declining since late October, reflecting this anxiety.

Capital flow reveals the market’s true intent

This stock market crash is not a complete capital exit but a structural shift.

Oil, electricity, and electrical equipment stocks rose 3.09%, network communication stocks and shipping stocks increased by 1.33% and 1.25%, respectively, while glass stocks fell 2.59%, other electronic stocks declined 2.15%, and semiconductor stocks dropped 1.8%. Capital is flowing out of the crowded midstream AI supporting sectors and into assets with clear cash flow, valuations not excessively inflated, and less sensitive to interest rate environments.

This precisely confirms: the market does not deny the AI industry but is seeking more certain value anchors amid industry chain differentiation.

Year-end triple pressures intensify uncertainty

Taiwan stocks face three major tests before the year’s end, collectively increasing market adjustment.

US stock index volatility directly impacts foreign capital allocation, and last Friday’s crash naturally triggered a correction today. More critically, the structural selling pressure brought by the IFRS 17 implementation for the insurance industry next year—this is not a negative view on fundamentals but a passive adjustment driven by accounting changes. If stocks are classified as FVOCI, even if sold at a profit in the future, they cannot enter the income statement, only into capital reserves. This effectively cuts off the previous path of beautifying EPS through stock disposals, prompting insurance companies to accelerate realizing unrealized gains accumulated over years before the system switch.

Additionally, this week’s “Super Central Bank Week,” with the Bank of Japan’s expected rate hikes, may trigger a retreat from interest rate spread trades, adding further variables.

Opportunities amid stock differentiation signals

Under the shadow of the market crash, Motech surged more than 8% to a new high of 2,370 yuan. The company benefited from inventory buildup for next-generation smartphones and high-end tablets, with consolidated revenue of NT$4.415 billion in the first 11 months, up nearly 40% year-on-year. The market is optimistic about maintaining double-digit growth for the full year.

信驊, the stock king, briefly dipped to 6,590 yuan but saw strong support, turning positive during the session. Benefiting from supply chain improvements, shipment performance exceeded expectations, leading to a second upward revision of this quarter’s outlook, and optimism that 2025 will be the peak year, with order visibility extending into the second quarter of next year. This has become a bullish indicator for high-priced stocks, reflecting market recognition of the fundamentals of quality companies.

Industry differentiation as a long-term theme

From a medium- to long-term perspective, this stock market crash is not a bubble burst but a necessary step toward market maturity.

Companies relying solely on “AI concepts,” with single customer structures and lacking profitability support, will face continuous valuation compression; while those with core technologies, stable profitability, diversified customer bases, and clear growth paths will stand out through rational selection.

Google’s case is most enlightening. As a company with the most scarce resources related to OpenAI (cash flow and complete industry chain), Google expects 56% of its operating cash flow to be spent on capital expenditure by 2026. Its vertical integration provides extreme cost advantages—TPUv7’s total cost of ownership is about 44% lower than NVIDIA’s GB200 servers. This is what the market should focus on—not concepts, but real cost competitiveness and profit certainty.

After the stock market crash, the real test has just begun: the market will use differentiation to tell investors who are the true winners in this AI industry revolution.