Taiwan Stocks Approach Pressure Zone as AI Sector Continues to Surge

Taiwan's stock market is nearing its historical peak, with the Taiex index surging past 46,000 points, marking a significant upward trend since its July rebound. The market's advance has been fueled by the sustained strength of artificial intelligence (AI) related stocks, which continue to drive the index higher.

Despite the market's upward momentum, analysts caution that it is entering a "pressure zone" where increased volatility is likely as it approaches historical highs. Institutional investors, however, maintain a positive outlook, especially concerning AI investments. Reports from the US indicate that major cloud service providers (CSPs) are not scaling back their AI investments, even in the face of potential cash flow challenges, signaling continued confidence in the sector.

This optimism is reflected in the capital flows, with foreign institutional investors making substantial net purchases of NT$206.136 billion in the centralized market. Domestic investment trusts and proprietary traders also contributed to the buying spree, with net purchases of NT$14.596 billion and NT$43.029 billion, respectively. Overall, major institutional players collectively bought NT$263.76 billion, indicating strong confidence in the market's direction.

While the broader market may experience fluctuations, the AI sector is expected to remain a key driver. Investors are advised to adopt a strategy of buying on dips rather than chasing rising prices, given the approaching resistance levels. Yongfeng Investment Trust forecasts the market to trade within a range of 45,000 to 48,000 points in the coming week.