Asia’s AI Stock Frenzy Is a Warning Sign for Global Markets

**SPEAKER_1** (0:02)
Bloomberg Audio Studios, Podcasts, Radio, News.

**Rebecca Choong Wilkins** (0:08)
Stock markets in South Korea and Taiwan have been on a wild ride lately. Record highs, sharp drops and dramatic swings in between.

**SPEAKER_3** (0:18)
Taiwan overtakes India as the fifth largest stock market in the world. The cost to be about a month ago was down 8%, two days in a row, and then up 8% from the third day, and then rally to new highs.

**Rebecca Choong Wilkins** (0:29)
Especially a bit of roller coaster week for the KOSPI in South Korea.
There's been plenty of volatility. But if you zoom out, the bigger picture tells another story.

**Shuli Ren** (0:39)
Korea's KOSPI index has nearly tripled over the past year, and Taiwan's Taiyaks has more than doubled. That kind of gains makes the US market looks like it's a standstill.

**Rebecca Choong Wilkins** (0:51)
Charlotte Yang covers Asian markets for Bloomberg. She says the rally comes down to one thing, AI.
Tech giants like Amazon, Google, Meta, and Microsoft are spending hundreds of billions a year building out AI infrastructure. All of that runs on advanced chips and semiconductors, many of them made in Korea and Taiwan.

**Shuli Ren** (1:14)
We're talking about companies like Taiwan's TSMC, that's the world's largest chip foundry. In Korea, the ad is laser-focused on memory chips.
SK Hynix and Samsung really dominate this segment.

**Rebecca Choong Wilkins** (1:28)
The explosive demand for these chips has helped turn these firms into some of the most profitable in the world. And as these Asian chip maker stocks kept climbing, retail investors piled in, hoping to cash in on the rally.

**Shuli Ren** (1:44)
They think that this is a one-single-generation rally, and where's property so expensive? My salary is not keeping up. Where's the inflation? Going into the stock market is my best way to make quick money.

**Rebecca Choong Wilkins** (1:57)
Retail investors in both markets have always been active. But this time, their behavior looks different. In Taiwan, many are borrowing heavily to buy more stocks. In Korea, some are turning to risky structured products to boost returns.
Bloomberg Opinion columnist Shuli Ren says it's this rapid build up of leverage that's now raising alarm bells.

**SPEAKER_1** (2:20)
Until you sell your holdings, these are just paper gains that can evaporate overnight. If the market suddenly turns, you end up with nothing. And possibly the capital came with a lot of leverage. The kind of wealth destruction that we could see, it could be tremendous, right?

**Rebecca Choong Wilkins** (2:37)
And those risks may not stop with individual investors. As markets grow more volatile and retail investors dive in deeper, Charlotte says the consequences could spread further.

**Shuli Ren** (2:49)
I think today the markets are far more interconnected than before. And just looking at the sharp downturns the other day we saw with Cospy. Cospy experienced a 10% drop and is quickly filtered into Nikkei, into Chinese market, and ultimately into the US overnight session.
So I think that illustrates how a shocking career or anywhere in Asia's tax sector can quickly ripple through and affect in US markets in way people didn't anticipate before.

**Rebecca Choong Wilkins** (3:23)
This is The Big Take Asia from Bloomberg News. I'm Rebecca Choong Wilkins in for Oanh Ha. Every week we take you inside some of the world's biggest and most powerful economies and the markets, tycoons, businesses that drive this ever shifting region. Today on the show, how individual investors in Taiwan and Korea are rolling the dice to try and cash in on the AI rally. What are the consequences for them and their economies?
If things go wrong, how far could the fallout spread?
To see just how widespread Taiwan's investing frenzy has become, Bloomberg went to a small stir-fry joint in Taipei, the island's capital city. The restaurant's called Pin Xian Ruo Chao, and lately, it's become famous for something other than the food. Nvidia CEO Jensen Huang was recently spotted having dinner there.

**Shuli Ren** (4:23)
They have round tapos with plastic stools, it's loud and a bit messy, but it's cheap and always you can expect good food.

**Rebecca Choong Wilkins** (4:30)
Since then, it's become a meeting place for Taiwanese people who are interested in investing in the stock market.

**Shuli Ren** (4:37)
So it was a Monday evening and the stock market that day actually sank earlier. So the benchmark index was down 3.5%.
But the mood there and the conversations people were having about the stocks were just still very upbeat. In one corner, there was excited chatter about AI and the market and whether they should be taking advantage of the day's decline and buy more stocks on the cheap. And in another corner, you have a middle-aged man. You can hear him lecturing on his friends about the in and outs of these P ratios and how to use them to pick winners.