Nomura Cuts Taiwanese Stocks on AI Sector Scrutiny, Tariffs

(Bloomberg) -- Nomura Holdings Inc. downgraded Taiwanese equities citing greater scrutiny of the artificial intelligence sector and US President Donald Trump’s plans to impose tariffs on trading partners.

The island’s stocks were cut to neutral from a tactical overweight in Nomura’s Asian allocation given “concerns about tariffs, chip sector restrictions, greater AI thematic scrutiny, and elevated valuations and investor positioning,” strategists including Chetan Seth wrote in a note dated Feb. 26.

Taiwan’s equity benchmark has largely remained unchanged this year, with its biggest component — Taiwan Semiconductor Manufacturing Co. — falling more than 3%. That compares with a gain of 3.6% in the broader MSCI Asia Pacific Index over the same period.

Chinese startup DeepSeek’s cost-effective AI model, which could rival leading US developers, is raising doubts if companies need to incur significant amounts of capital expenditure to develop such technology. That may weigh on TSMC — the main chip supplier to Apple Inc. and Nvidia Corp.

The strategists increased their year-end target for the MSCI China Index to 80 from 70, citing renewed investor interest in China’s technological innovation such as DeepSeek which “suggests that Chinese equities no longer warrant a deep discount.” Since returning to the White House in January, Trump has imposed a new 10% tariff on Chinese goods.

The downgrade comes at a time when China once again unveiled stronger language toward Taiwan, placing further pressure on stocks.