The AI Investment Boom's Asia Spillovers

The AI investment boom, led by US hyperscaler capex, is providing a massive boost to Asian tech exporters, particularly Taiwan and Korea, who dominate the supply chain. This trend is creating a K-shaped recovery and significant current account surpluses in North Asia.

Key Takeaways

• 1.AI investment is surging, with US hyperscalers expected to invest $750bn in 2026, primarily in data centers and hardware.
• 2.Taiwan and South Korea are the primary beneficiaries of the AI boom due to their dominance in logic chips, memory chips, and server manufacturing.
• 3.The AI boom is driving 'K-shaped' economic recoveries, where tech sectors experience rapid growth while domestic demand and other manufacturing sectors remain stagnant.

Table of Contents

• The AI investment boom’s Asia spillovers
• AI capex is mostly equipment manufactured in Asia
• AI capex spillovers have boosted, and will boost, East Asian growth significantly
• Estimation approach 1 – Using industry GDP data
• Approach 2 – Estimating domestic value-added in tech exports
• Other approaches
• Implications for our forecasts
• Continued K-shaped growth within leading tech exporters
• Divergence in regional current account positions and FX appreciation pressure
• Market outperformance in North Asia to continue near-term
• Potential side effects – higher growth volatility in tech exporters, softer services exports?

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