Fund managers forced to sell top Asia chip stocks over concentration limits

AI Concentration Risk Warps Asia Stock Picking as Three Chip Giants Dominate

The AI boom has created a lopsided rally across Asia-Pacific equity markets, with just three semiconductor companies now so dominant in regional benchmarks that active fund managers are being compelled to sell their best-performing holdings.

Forced to Sell the Winners

TSMC, Samsung, and SK Hynix together account for nearly a third of the MSCI AC Asia Pacific ex-Japan Index, according to a Reuters analysis published on Sunday. The trio’s weight has grown so large that portfolio managers are running into internal rules capping exposure to individual stocks or sectors.reuters

“We have been forced sellers of TSMC, Samsung and MediaTek,” Sam Konrad, investment manager for Asia Equity Income at Jupiter Asset Management, told Reuters. Konrad’s fund has delivered strong returns this year thanks to AI-driven gains in Taiwan and South Korea, but the concentration has become too heavy for his mandate to bear.yahoo

A JPMorgan report flagged the same dynamic, noting that many international fund managers were approaching or hitting concentration ceilings on these names. The rebalancing is not driven by bearish sentiment toward semiconductors but by compliance constraints.morningstar

A Lopsided Rally

The imbalance is stark. The MSCI Asia-ex Japan benchmark has returned roughly 30% so far in 2026, but the gains are heavily skewed toward markets hosting these chip giants. When South Korea and Taiwan are stripped out, performance drops sharply, underscoring how dependent the rally is on a narrow band of AI beneficiaries.marketwatch

The concentration extends beyond the regional index. TSMC alone represents roughly 58% of the MSCI Taiwan Index, while Samsung and SK Hynix together make up more than half of the MSCI Korea Index, according to analysis from HDFC. At the global level, AI-linked names are driving nearly all positive earnings momentum across both developed and emerging markets.hdfc-tru

Down the Supply Chain

Rather than abandoning the AI trade, fund managers squeezed out of the top three names are reallocating further down the supply chain into smaller-cap technology suppliers in Taiwan and across the broader region. JPMorgan noted that capital is flowing toward other tech names that benefit from the same structural tailwinds but do not yet dominate index weights.mezha

The shift carries its own risks. Concentrating flows into a narrower set of mid-cap suppliers could create secondary concentration problems, replicating at a smaller scale the very dynamic managers are trying to escape.kucoin