Why Asian Stock Markets Are Reshaping the Global Rankings: Goldman's Big Bet on South Korea and Taiwan

Goldman Sachs has raised its target for South Korea's main stock index (the KOSPI) to 9,000. The investment bank believes the growth in AI-related technology—particularly semiconductors and infrastructure—will fuel the South Korean stock market, which has already jumped more than 80% so far in 2026. According to Goldman, this AI boom could push South Korea's annual economic growth to 2.5% in 2026, up from just 1% the year before.

The shift is reshaping which countries' stock markets matter most globally. Taiwan has now climbed to become the world's sixth-largest stock market, overtaking Canada. South Korea has jumped into eighth place, surpassing the United Kingdom. Samsung Electronics, South Korea's tech giant, crossed the $1 trillion market value mark in May 2026—joining an elite group of the world's most valuable companies.

Taiwan's Strength—and Its Concentration Risk

Goldman's outlook for Taiwan is even more bullish. The bank expects Taiwan's economy to grow almost 10% in 2026, up from 8.7% the year before. Much of this comes from the global race to build AI infrastructure, which relies heavily on semiconductors manufactured in Taiwan.

Here's where it gets interesting: Taiwan Semiconductor Manufacturing Company (TSMC)—essentially the world's leading chip maker for AI—accounts for more than 40% of Taiwan's main stock index. That means if you own a fund that tracks Taiwan's stock market, you're heavily betting on one company's continued success.

This concentration mirrors what happened during the dot-com boom of the late 1990s, when a handful of internet-related stocks drove entire index returns while masking weakness elsewhere in the economy. The key difference now is that AI infrastructure appears to be solving real business problems—supporting data centers, cloud computing, and automation—rather than pure speculation. Still, the risk remains: if TSMC or the broader chip sector stumbles, Taiwan's entire stock market suffers more than it might otherwise.

Interest Rate Moves Ahead

Goldman expects both South Korea and Taiwan to raise interest rates as their economies strengthen. South Korea's central bank is forecast to raise rates twice by 12.5 basis points each time (a basis point is one-hundredth of a percentage point) in the second half of 2026. Taiwan's central bank is expected to move more cautiously, with smaller rate increases.

These different approaches reflect different concerns. South Korea appears worried about its economy overheating and prices rising too fast, so it's raising rates more aggressively. Taiwan's central bank seems more comfortable it can manage strong growth without triggering runaway inflation, so it's moving slowly.

Timothy Moe, Goldman's chief strategist for Asia-Pacific equities, describes the current environment as a "perfect positive storm" for South Korea: strong domestic semiconductor makers like Samsung, combined with money flowing into the country to build AI infrastructure.

The Wider Infrastructure Play

Beyond just chips, the AI boom is driving demand for optical networking equipment—essentially the fiber optics and related gear that connects data centers to each other. Lumentum, a major supplier of this equipment, plans to expand its production capacity by 40% between late 2025 and mid-2026, with more expansion likely through the rest of the year.

This matters because it shows how AI demand ripples through the entire technology supply chain. When companies build AI data centers, they need chips, but they also need the cables, connections, and power systems to make those data centers work. The optical networking expansion represents a second wave of investment beyond semiconductors themselves.

A New World Order for Stock Markets

What we're witnessing is a redrawing of the world's stock market map. Raman Aylur Subramanian, who oversees index regional research at MSCI, notes that this reordering is accelerating as more money chases AI-related opportunities. Economies once considered "emerging markets" now have stock markets as large as those in traditional developed countries like Canada and the U.K.

This shift creates real questions for investors. If you're putting money into a broad emerging-markets fund, you're now holding what are effectively developed-market companies. This changes the risk profile, currency exposure, and diversification benefits of those investments.

When Does the Rally End?

The current rally in Asian technology stocks is concentrated. Semiconductors and AI-related infrastructure drive the gains, while other sectors lag. History suggests that this kind of narrow leadership either broadens out to include more of the economy, or it ends in a sharp correction.

Goldman's price targets assume that AI spending will continue to grow and that companies will actually see returns on their AI investments. Markets today are pricing in a future where AI delivers real productivity gains and profits. But this assumption isn't guaranteed. If companies deploy AI capital and don't see expected returns, or if the pace of AI spending slows, stock prices—especially those concentrated in semiconductor and networking equipment makers—could fall sharply.

For professional investors, the harder question is timing: when does the market shift from betting on AI infrastructure investment to betting on actual profits from AI? We're not quite at that point yet.

Risks Worth Watching

Despite Goldman's bullish view, several things could derail this rally. Taiwan's central role in global chip manufacturing makes its stock market vulnerable to geopolitical shocks—any tension between Taiwan and China, or new trade restrictions on semiconductor exports, could rattle investors quickly.

Trade policy is another wild card. New tariffs or restrictions on tech trade could disrupt the flow of investment and equipment that's fueling the current cycle.

Currency movements also matter. Rapid stock market growth in South Korea and Taiwan could attract speculative money flooding in from abroad, chasing quick gains. That same money can flee just as quickly during times of market stress, causing sharp currency moves and losses for foreign investors.

Finally, the concentration risk is real. TSMC's dominance in Taiwan's index means that a single company's troubles would drag down the entire market far more than in more diversified economies. Portfolio managers holding Taiwan exposure need to ask whether they're comfortable with that level of single-company risk.