The Iran war was supposed to wreck stocks. It has not.
Asia's chip makers are running circles around the rest of the world. Korea's Kospi is up 78% this year, while India's Sensex is down 9.3%.
That gap is the AI hardware story playing out in real time.
Stocks in South Korea and Taiwan rallied the most in the world this month. The same names are driving both markets.
The big three are Samsung, SK Hynix, and Taiwan Semiconductor (TSM). They make the chips that run AI data centers.
When AI demand goes up, their order books go up too. Cloud giants like Amazon and Microsoft can't run AI without these parts.
India's Sensex tells the other side of the story. The country is heavy on oil and light on AI, and its rupee sits near a record low.
That is why India's index is the world's second-worst this year. Oil-heavy markets have been the losers of the war so far.
JPMorgan told clients to buy call spreads on the Taiex. They also told them to look at the Kospi 200 and Japan's Nikkei-225.
A call spread is an options trade. It pays off if a stock or index moves up to a target price.
"Hardware remains the earnings backbone of the AI theme," the JPMorgan team wrote. They named Taiwan as the best way to play it at the index level.
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Price swings have grown bigger in Taiwan and Korea as the rallies built up. That measure is what trade desks call implied volatility.
Both markets sit near peak swings versus the S&P 500. The Cboe VIX has slipped back below its one-year mean.
That mix is what trade desks call a "vol up, spot up" market. It usually means traders are paying up to chase the move.
Korean shares have been so popular that Interactive Brokers (IBKR) opened direct access for U.S. retail clients. Local rules also now allow leveraged ETFs tied to single stocks.
JPMorgan said that keeps the risk of "flow-driven overshoots alive." A flow-driven overshoot is when traders chasing a move push prices past where they should be.
The 12-month spread between the Kospi 200 and the S&P 500 sits at peak levels, per Societe Generale. The firm does not see that gap closing in any "orderly" way.
It would need lower oil prices and a pause in the tech rally to do so. Both look unlikely to arrive soon.
Buyers watching the AI trade keep one eye on Korea and Taiwan, and the other on the Trump-Xi summit. Bull bets on China-linked ETFs are also on the rise.
The summit could touch on AI rules. Stock buyers are watching that closely.
For now, AI hardware is the trade. And the chip names with the most demand sit in Asia, not the U.S.
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