As equity investors enter the final stretch of a pivotal year that’s propelled South Korea and Taiwan to the forefront of the global AI trade, the latter is emerging as the stronger bet.

The Taiex Index beat the Kospi by about 23 percentage points last quarter, the widest margin since the turn of the century. Earnings upgrades also outpaced those for its Korean peer for the first time since March 2025. About 40% of the fund managers surveyed by Bank of America Corp. last month said they were overweight Taiwan, versus 25% for Korea.

Driving the optimism are Taiwan’s deeper linkages across the AI supply chain and a more upbeat earnings outlook.

“The distinction for us is not simply the amount of AI exposure, but the nature of the earnings supporting it,” said Vikas Pershad, a portfolio manager at M&G Investments in Singapore. “Taiwan offers a broader and deeper opportunity set. Its earnings come from volume and that makes its earnings upgrades broader and stickier. Korea’s earnings, in the near-term, are coming from price.”Taiwan offers investors exposure across chip design and manufacturing, packaging, networking, and servers, meaning it has more ways to benefit as AI spending broadens.

Korea’s market leadership, meanwhile, remains heavily concentrated in chipmakers Samsung Electronics Co. and SK Hynix Inc., leaving it more vulnerable as doubts emerge over how much longer the current memory upcycle can run.

The Taiex and Kospi have traded places at the top of the global leaderboard this year, even as the latter has dominated headlines for its more eye-catching moves. Up 72% in 2026, Taiwan’s benchmark is currently the top performer among more than 90 equity indexes tracked by Bloomberg. The Kospi is ranked second, with gains of about 65%.

Taiwan’s lead comes as shares of Samsung and SK Hynix plunged between 19% and 33% in the three months ended September. That followed a six-quarter winning streak as surging memory-chip prices drove blockbuster earnings and fueled rapid profit upgrades from analysts.

Societe Generale SA is “keeping a preference for Taiwan over Korean equities, given the diverging earnings growth trajectories,” strategists including Rajat Agarwal wrote in note. Memory “price appreciation is expected to slow over coming quarters, before normalization in 2028” as Chinese competition rises, while Korea’s July deleveraging has broadened into a wider retreat from the market, they wrote.

The counter view is AI-related demand will exacerbate the ongoing semiconductor supply shortage, keeping prices for high-bandwidth memory chips supported. Peter Lee, a managing director at Citigroup Inc. who jointly oversees its global tech and communication research, said last week that investors should start buying shares of firms like Samsung and SK Hynix as the market is underestimating how much HBM chips will be needed in 2027.

In terms of valuations, the Taiex is trading at about 18 times its one-year forward estimated earnings. The Kospi trades at around 5.5 times, reflecting concern that the memory cycle may be approaching a peak, and in part the longstanding “Korea discount” that has kept the market cheap relative to global peers.

Still, when asked which market would benefit the most from the next phase of the AI cycle, 35% of the respondents in the BofA survey chose Taiwan. Just 5% picked Korea.

Shares of Taiwan Semiconductor Manufacturing Co. rose 2.9% in the three months to September, capping a sixth straight quarterly advance.

But Taiex is delivering broader gains than its other tech-heavy peers, reflecting a wider range of investment opportunities. About 10% of the gauge’s stocks have at least doubled this year, compared with 4.1% for the Kospi and 5.7% for Japan’s Nikkei 225.

“The next leg of upside for Taiwan stocks is likely to depend less on broad AI enthusiasm and more on local tech companies that remain exposed to genuine bottlenecks in the AI value chain,” said Gary Tan, portfolio manager at Allspring Global Investments.