Goldman Sachs raised its 12-month target for the MSCI Asia Pacific ex-Japan Index to 1,120 from 1,080 last week, implying 26% upside, and touching off the predictable wave of enthusiasm for broad Asia exposure. Before you buy the index, though, it pays to read the fine print on what is actually driving it.
The Bigger Trend
Second-quarter earnings across the index grew 102%, with 44% beats against 27% misses, led by Singapore, Taiwan, and Indonesia, while Australia, Malaysia, and India lagged. That sounds broad. It is not. As of early June, the MSCI Asia Pacific ex-Japan Index was up 27% year-to-date. Strip out South Korea and Taiwan, and the rest of the region was actually down 4%.
The MSCI AC Asia Pacific ex-Japan Index factsheet dated Aug. 31, 2026 shows Taiwan at 26.92% of the index and South Korea at 20.44%. Those two countries alone account for nearly half the benchmark. Reuters reported in June that Goldman explicitly said it favors North Asia and AI-related tech hardware exposure, with energy security, defense, and shareholder returns as secondary themes. The 1,120 target is, in plain terms, a concentrated call on AI semiconductors.
The Investment Case
The hardware earnings underpinning this call are genuinely striking. SK Hynix posted Q2 2026 revenue of 79.3187 trillion won, operating profit of 60.5426 trillion won at a 76% margin, and net profit of 93.9226 trillion won, all-time highs across every line. In Taiwan, technology accounts for more than 80% of the index weight, and it remains one of the clearest examples of the AI hardware cycle. TSMC’s advanced node capacity remains the chokepoint for every AI accelerator Nvidia and its peers can ship.
Goldman strategist Timothy Moe argues the surge in demand for memory chips is expected to extend through 2028 and beyond. The bank simultaneously upgraded Taiwan’s equity rating to overweight and lifted its KOSPI target for South Korea from 9,000 to 12,000. That South Korea call implies 36.3% upside on its own.
Building Wealth Around This Idea
Investors considering EWY (iShares MSCI South Korea), EWT (iShares MSCI Taiwan), or the broader AAXJ need to account for a layer of risk that does not show up in the earnings numbers: currency. Every currency Goldman links to AI has lost ground against the dollar this year, with the dollar index up nearly 3%. The Singapore dollar has slipped 0.28%; the won has fallen 1.64%, and the Taiwan dollar 3.05%. Goldman is bullish on those currencies as AI surpluses build, but the 2026 performance to date illustrates the gap between the equity story and what dollar-based investors actually collect.
The laggards Goldman ranks below are worth a separate look. Goldman rates India and Singapore at market weight, and Australia, Thailand, Indonesia, and the Philippines as underweight. India’s underperformance in Q2 earnings is a short-term read, not a structural verdict. At roughly 10-11% of the index, India offers exposure to domestic consumption, financial services, and infrastructure spending that carries almost no correlation to the HBM memory cycle. For investors already overweight U.S. tech, adding EWY and EWT doubles down on the same AI capex theme rather than diversifying it.
Risks to Monitor
Memory chips have a long history of boom-bust cycles. Goldman’s call that this one extends through 2028 is a bet that AI demand growth will outpace capacity additions for at least two more years. That may well prove correct. But capacity additions from Samsung, SK Hynix, and Micron are accelerating, and any meaningful softening in hyperscaler AI capital spending budgets would pressure HBM prices faster than the consensus expects. Investors already note concern that major technology companies could scale back AI infrastructure spending, potentially weighing on future demand.
Geopolitical concentration compounds the issue. The manufacturing nodes powering this market surge are concentrated in very specific geographic corridors, with Taiwan’s semiconductor ecosystem anchored by foundries producing advanced logic chips for AI training and inference. A cross-strait disruption, however remote, would not just clip TSM’s share price. It would change the pricing of every fund holding that roughly 27% Taiwan weight.
Daily Wealth Takeaway
Goldman’s 1,120 target is credible if the AI hardware cycle holds. The lesson is not to avoid the trade. It is to own it deliberately. A broad Asia ex-Japan fund buys you Korea and Taiwan whether you want them or not. Investors who already hold Nvidia, Broadcom, or a U.S. semiconductor ETF may find that EWY or EWT compounds an existing concentration rather than adding genuine diversification. The more interesting long-term question may be whether India and Australia, both underperformers right now, become the better wealth-building positions precisely because their earnings are not priced for perfection on a cycle that, by definition, must eventually turn.