(Bloomberg) — There is a lot of debate about whether the AI ​​stock rally is over, but for some investors, a further decline could be a buying opportunity.

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Money managers in Asia are on the hunt for their next buy even after the region’s technology stocks posted their biggest two-day decline ever this week, reflecting unwavering confidence in a trade that has underpinned the rebound in global equity markets. Taiwan Semiconductor Manufacturing Co., Samsung Electronics Co. and SK Hynix Inc. are still attractive bets as the long-term outlook for AI remains undimmed, they say.

“Some of them definitely look a little more attractive to us than they did two weeks ago, given how much they’ve fallen,” said William Yuen, investment director at Invesco Hong Kong Ltd. “For us, the trend is to at least maintain these types of tech positions, or if the opportunity arises in another sell-off, we’ll add to them.”

The debate goes to the heart of a question that has been troubling stock investors for months: Has the red-hot AI business finally reached a tipping point? Analysts doubt that the industry can live up to the hype and whether the returns justify the high investments that have been put into the industry.

The following six charts show the current situation and explain why some investors continue to believe in the trade:

Asia’s technology companies remain a force to be reckoned with, even as share prices head for the longest weekly losing streak since late 2022. The combined market value of TSMC, Samsung and SK Hynix is ​​$1.2 trillion, up from $312 billion a decade ago. Their share of the MSCI Emerging Markets Index has risen to nearly 15% from less than 4% at the end of 2007, according to Bloomberg’s calculation.

Analysts have raised their earnings forecasts for key Asian chip stocks despite the recent slump, unlike in the U.S., where consensus estimates have been revised downward since late July. Morgan Stanley reinstated TSMC as its top pick after the recent sell-off, citing the company’s “quality and defensive nature during a prolonged half-cycle.”

“Confirmation of the price increase and continued strength in AI investments should be the key catalysts,” Morgan Stanley analysts, including Charlie Chan, wrote in a note on Tuesday.

Both TSMC and Samsung reported sharply beaten second-quarter results, while analysts said TSMC’s margin forecast indicated a possible price increase for its top-of-the-line chips. The two companies and SK Hynix are expected to report profit growth of 26 percent to 55 percent next year, compared with an average of just 12 percent among members of the MSCI Asia Pacific Index, according to data compiled by Bloomberg.

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“TSMC is the dominant foundry, so we think they’re in a pretty solid position,” said Ganesh Ramachandran of Lazard Asset Management, whose $1 billion Lazard Emerging Markets Fund holds the stock as one of its largest holdings. As for SK Hynix, the company’s memory business is a cyclical industry that has only just “hit the ground,” he said.

The Bloomberg Asia Pacific Semiconductors Index has fallen nearly 20 percent since its July peak, but the decline is relatively small compared to the biggest falls of the past two decades. To put the recent decline in perspective, the index fell about 80 percent during the global financial crisis and the bursting of the dot-com bubble.

The region’s technology stocks have become cheaper after recent losses, which could increase their appeal to investors. While consensus earnings are rising and prices are falling, the valuation on the Bloomberg index – measured by the price-to-earnings ratio – has fallen below its 10-year average.

But despite all the optimism, investors are also hedging. Demand for protection against further price declines in TSMC and Samsung has surged this week, while volatility in TSMC has risen to its most pessimistic level since May last year.

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– With support from Sangmi Cha.

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