Goldman Sachs and UBS See AI Driving a North-South Divide Across Asian Equity Markets

Two of Wall Street's largest banks are pointing to artificial intelligence investment and energy resilience as the forces splitting Asian equity markets into distinct winners and losers, with North Asian tech hubs pulling sharply ahead of their southern counterparts.

Tim Moe, chief Asia Pacific regional equity strategist and co-head of macro research at Goldman Sachs Research, described some North Asian markets as seeing a "massive outperformance" compared to South Asia, according to a transcript of Goldman Sachs' "Exchanges" podcast. Markets in Indonesia and South Asia — which he characterized as having "no tech and lots of energy vulnerability" — are down 25% on the year, Moe said.

North Asian economies, by contrast, carry "greater buffer stocks" and can absorb higher energy costs, while South Asia has "much fewer buffers and doesn't have the ability fiscally to offset the pass-through of higher energy prices to the economy," Moe said.

Investor attention in the north of the continent has concentrated on AI-oriented tech stocks, particularly in Taiwan, South Korea, and Japan, where technology names make up roughly 80%, 60%, and 30% of their respective benchmark indexes. South Korea's market is up more than 80% year-to-date, making it the best performer in the region alongside Taiwan, Moe noted.

Despite that run-up, Moe flagged a valuation concern for Korean semiconductor names such as Samsung Electronics and SK Hynix, which are trading at approximately five to six times this year's earnings and about four times next year's. "That implicitly says that the market really doesn't believe that that profitability can last for very long," he said.

On China, Moe sees A-shares — yuan-denominated securities traded on mainland exchanges — up 10% year-to-date and "meaningfully" outperforming H-shares, the mainland stocks listed in Hong Kong. He attributed the divergence in part to China exiting more than three years of producer-price deflation, with the most recent reading coming in at 2.8% — above consensus — for two consecutive months.

H-shares, he added, are more exposed to internet application companies that sit on the "softer end of the spectrum of the AI trade," with investor attention skewed toward upstream hardware rather than software platforms.

UBS struck a similarly constructive tone on Chinese technology on Tuesday. Suresh Tantia, head chief investment officer of Asia equity strategy at UBS Global Wealth Management, told CNBC's "Squawk Box Asia" that easing tensions between Washington and Beijing following last week's Trump-Xi summit should allow investors to return their focus to market fundamentals.

"It seems like both countries are following the policy of live and let live, and that's not bad news from a market perspective, because markets can go back to fundamentals," Tantia said.

Tantia pointed to strong earnings from Chinese technology firms as a concrete underpinning for the bullish view. Baidu on Monday reported a 49% surge in revenue from its AI-focused business to 13.6 billion yuan, or approximately $2 billion. Separately, AI company Zhipu, which listed in January, last month reported revenue rose roughly 132% in 2025 from a year earlier.

"Looking at the valuation and double-digit earnings growth, we think from a risk-reward perspective it makes a lot of sense for investors to buy China equity market and China tech stocks," Tantia said. UBS expressed a preference for Hong Kong-listed H-shares over mainland A-shares, citing more attractive valuations.

China's April economic data, released Monday, showed consumption, industrial output, and investment growth all missing market expectations — a reminder that macro headwinds persist even as technology earnings hold up.

Moe, meanwhile, issued a broader caution on the region's near-term trajectory, warning of a "rude awakening" once energy supply disruptions feed more fully into economies. "I think we could be set up for some kind of correction in the summer months," he said — a signal that, for now, the divergence between North and South Asian markets may face its own test before year-end.

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