Goldman Sachs: North Asia Tech Overweight Despite Geopolitical Risks

Goldman Sachs has reaffirmed its overweight stance on North Asian equities, particularly favoring technology hardware, capital goods, and banks, even as geopolitical tensions simmer and massive national investment plans create short-term market jitters. In its second-half Asia equity outlook, the bank argues that the region's earnings momentum—driven by a semiconductor memory supercycle, AI infrastructure, and defense spending—remains the dominant market driver, outweighing valuation concerns.

The Earnings Engine

Goldman's analysts project the MSCI Asia Pacific ex-Japan Index to deliver mid-teen returns in the second half, underpinned by expected earnings growth of 60% in 2026 and 22% in 2027. They note that nearly 80% of year-to-date regional performance can be attributed to earnings revisions, signaling that markets are increasingly trading on fundamentals. The bank's message is clear: stick with structural winners rather than rotating into lagging sectors.

Key overweight markets include South Korea, Taiwan, Japan, and China's domestic A-share market. Within these, technology hardware, capital goods, and banks are singled out. The semiconductor memory supercycle is described as "one of the most powerful and prominent themes that is still not fully priced." This aligns with the broader AI infrastructure buildout, which Goldman sees as a multi-year growth catalyst.

Geopolitical Crosscurrents

However, the bullish outlook is not without headwinds. On the same day, China expanded export controls targeting Japanese defense-linked entities, escalating a campaign launched in January. The move follows Prime Minister Sanae Takaichi's comments on Taiwan, which sparked a diplomatic spat. While these controls are unlikely to derail the broader tech cycle, they introduce supply chain uncertainty for Japanese components used in defense and advanced manufacturing.

Separately, South Korea unveiled sweeping AI and semiconductor mega-projects totaling 800 trillion won ($517.87 billion). President Lee Jae Myung announced plans for two new fabrication plants in the country's southwest, aiming to strengthen leadership in the sector. Paradoxically, shares of Samsung Electronics and SK Hynix fell on the news—a classic "buy the rumor, sell the fact" reaction driven by concerns over massive capital expenditure and potential oversupply. Goldman, however, views such investments as reinforcing the long-term structural case for semiconductors.

Commodities as a Complement

The same structural themes also underpin Goldman's bullish commodity outlook. The bank recommends continued diversification into commodities, particularly copper and gold, citing AI infrastructure, power generation, and defense spending as demand drivers. Even after the reopening of the Strait of Hormuz and retreating oil prices, Goldman argues that geopolitical shocks have reinforced long-term demand for metals and energy infrastructure.

Key Takeaways

Investors should note that while near-term volatility may arise from geopolitical developments and mega-project announcements, the fundamental earnings trajectory remains robust. The semiconductor supercycle, AI adoption, and defense spending are not merely cyclical tailwinds but secular shifts. Goldman's overweight on North Asia tech is a bet on earnings delivery, not on multiple expansion.

1. Goldman Sachs maintains overweight on North Asia (South Korea, Taiwan, Japan, China A-shares) with a focus on tech hardware, capital goods, and banks.
2. Earnings growth—not valuations—is the primary market driver; MSCI Asia Pacific ex-Japan expected to deliver mid-teen returns.
3. Geopolitical risks (China-Japan export controls) and massive capex plans (South Korea's $517B chip projects) create short-term uncertainty but do not alter the structural bull case.
4. Commodities, especially copper and gold, remain complementary plays tied to the same AI and infrastructure themes.

Sources: CNBC - Goldman Sachs, CNBC - China Japan Export Controls, CNBC - Samsung SK Hynix, CNBC - Daily Open.