Taiwan stocks dip as investors eye power chips, drones

Taiwan's stock market experienced a downturn on Monday, with the TAIEX index closing 0.48% lower after shedding earlier gains. Major index-weighted stocks saw declines, including TSMC, MediaTek, and Delta Electronics, though Foxconn posted a slight increase. The market saw notable investor interest shift towards defense, drone, and power semiconductor stocks, with several companies reaching their daily price limits. This surge is fueled by expectations of increased defense budgets and the growing demand for power semiconductors driven by AI server requirements.

This strategic rotation saw profit-taking in previously strong sectors like passive components. Fund managers noted that while the market's long-term outlook remains positive, increased borrowing by investors and record short futures contracts from foreign investors suggest continued volatility. Investors are advised to focus on sectors benefiting from AI adoption and advanced technologies, such as semiconductor testing, chip design, and silicon wafers, and consider gradually building positions during market pullbacks.