This Japanese Semiconductor Name Is the Top Asia Stock Pick for 2026

Asian tech stocks enter 2026 on a little losing streak.

The Stoxx Asia Technology 100 index, for instance, peaked on November 3. The index, which tracks 100 of the largest Asian tech companies, has since corrected 4.4%, and is on a correcting course that has yet to turn.

Doubts over the sustainability of the inflated valuations of artificial intelligence plays have surfaced worldwide, while Asia is also contending with higher trade tariffs, currencies that are appreciating against the U.S. dollar, and questions surrounding domestic growth.

It is hard to look beyond the sector for the most exciting Asia stocks for next year, however.

Fabulous Chip Fab

My perennial pick has been Taiwan Semiconductor Manufacturing Co.  (TSM)  (TW:2330).

Head, shoulders and chest above its nearest rivals in the chip-foundry segment, it shows no signs of letting its commanding market position erode. In fact, it has reinforced its position so that, as of Q3, it has secured 72.0% market share in the segment, according to Counterpoint Research. That’s up from 66.0% the same quarter last year.

This is an industry that has incredibly high barriers to entry. It takes time and billions of dollars to build and successfully operate a semiconductor foundry. To boost its own U.S. production, TSMC is investing $165 billion on three new fabrication plants to expand its existing operation, which began production in late 2024.

Those plans were already in the works before U.S. President Donald Trump announced his massively increased tariffs on the rest of the world. While U.S. companies that import goods from Taiwan must pay an extra 20% flat tariff, semiconductors are treated separately, with the Trump administration threatening to impose a 100% trade tax on imported chips.

There are murmurs among administration staffers, however, that this threat will not be imposed “soon,” whatever that means, due to worries about disrupting U.S. industry at a time of short chip supply. What’s more, companies that make chips inside the United States are due to be exempt. It is not clear, yet, whether TSMC would thereby win a worldwide waiver on imported chips, or only those made at its operations in Phoenix and small fab in Camas, Washington.

TSMC shares are up 34.3% this year, an extremely solid showing, outrunning the 12.3% gain in the Stoxx Asia Tech index. I am confident that TSMC can form a core holding in any portfolio. There are always concerns that its performance may flag if the tech sector takes a hit as a whole. But since TSMC supplies essentially all the major chip designers and has such a lock on global market share, it’s hard to fathom how it would not continue to see strong earnings and profits growth, whoever the eventual winners prove to be in the AI arm race.

Must Do More!

I’m forcing myself to look beyond TSMC, however, as my pick for the year ahead. I identified it as the top prospect for 2024, and ruled myself out from selecting it last year to force me to look further afield. The situation is the same heading into 2026.

For Asia’s strongest play on AI, investors should examine Softbank Group (SFTBY) (T:9984). Founder Masayoshi Son has turned what began as a prosaic software-sales company and telecom into the world’s premier tech-sector venture-capital fund.

Softbank saw a tripling of its shares this year through late October, setting an all-time closing high of ¥27,315 on October 29, at which point it was up 197.4% for the year. It has since corrected heavily, down 69.4%.

Softbank is a prominent partner to Oracle  (ORCL) , using Oracle tech to offer cloud services in Japan. Softbank has also teamed up with Oracle and OpenAI on the Stargate project to build data-center infrastructure inside the United States, with Softbank leaning on its subsidiary SB Energy’s solar-power farms in Texas and California to help deliver power to the project. Son is chairman of Stargate, which has pledged to invest $500 billion by 2029.

The one-month, 19% drop in Oracle shares after its quarterly revenue miss has spread to Softbank. Investors are concerned about Oracle’s rapidly increasing debt burden, currently blown out to $100 billion, and lagging revenue conversion. There are doubts over whether Oracle’s heavy spending will pay off fast enough for it to sustain its borrowing.

Softbank Sells to Fund Investment

The same can be said of Softbank. It declared in early November that it has sold its entire $5.8 billion holding in Nvidia  (NVDA) , to invest the proceeds in other AI investments, as I explained at the time. It did indicate that Softbank must sell assets to fund its existing investment commitments.

Softbank shares are also tracking very closely with Arm Holdings  (ARM)  stock. Softbank still owns some 87% of Arm after its Nasdaq stock listing in September 2023. Arm shares are down by more than one-third (34.9% at last count) since October 27, and are even looking at a 9.2% loss for the year. Arm’s architecture is used in virtually every smartphone globally, but the company said in mid-year that it would shave its earnings forecasts so that it can reinvest profits into building its own chips, chiplets and chip components.

Making a full chip at Arm risks putting the company in direct competition with customers such as Nvidia  (NVDA) , Qualcomm  (QCOM)  and even Amazon  (AMZN) , which design their own chips. We need to watch how the software designer’s forays into hardware proceed, with Arm shares as well as AI trends directing the course for Softbank for the year head.

We may soon see an attractive entry point for Softbank shares, if we’re not already at that point. I will watch as 2026 opens to see if and when it would be best to rotate back into Softbank.

Advantest for 2026

My pick for an Asia play for the year ahead, meanwhile, is the Japanese company Advantest (ATEYY) (T:6857). The Tokyo-based company makes testing equipment used by semiconductor designers and manufacturers, to check that their chips are up to standard.

Just like TSMC, Advantest is pretty brand-agnostic, free to sell its testing systems to any chip producer. This should stand it in good stead as the competition in artificial intelligence intensifies.

Advantest sells to companies that make their own chips such as Samsung Electronics (KR:005930), Intel  (INTC)  and Texas Instruments  (TXN) . But it also sells to “fabless” chip designers such as Nvidia and Qualcomm that outsource the production of their chips to the likes of TSMC. It even sells testing great to TSMC itself, as well as other chip fabs such as Samsung and the only major U.S.-based chip fab, GlobalFoundries  (GFS) .

Advantest shares have doubled this year, up 102.2% for 2025. But that’s after an 18.7% correction since the end of October. That leaves it an expensive stock, trading at a forward price/earnings ratio of around 48. The company has, however, just come off record quarterly numbers for its Q1, causing the company to boost its sales forecast for the year ending March 2026 to 21.8%, with earnings forecast to rise 70.6%.

I’d highlight both Advantest and TSMC as strong plays on the chip sector, both companies part of the backbone of the industry — whoever is designing and selling the chips.

Softbank and Arm Holdings, meanwhile, are worth watching to see if Arm can deliver a payoff on its decision to invest into its own operations. These two stocks have not stopped correcting but could be attractive to enter at some point in the first half of 2026.

At the time of publication, McMillan had no positions in any securities mentioned.