Why EWY and EWT Are Rising: The Real AI Supply Chain Bottleneck

Master, today's topic is a pair of country ETFs that are getting renewed attention in the AI hardware trade: the iShares MSCI South Korea ETF (EWY) and the iShares MSCI Taiwan ETF (EWT).

The public face of the AI revolution is NVIDIA, Microsoft, Google, Meta, and the rest of U.S. big tech. But for AI to become a working reality inside data centers, it must pass through a physical supply chain that manufactures chips, attaches memory, packages components, and assembles servers.

At the center of that bottleneck sit Taiwan's foundry and packaging ecosystem and Korea's HBM memory supply chain. That is why EWT and EWY are not merely country ETFs. They are concentrated ways to gain exposure to the AI hardware cycle.

» See also: TSMC Surges 35%: Is the Semiconductor Cycle Over? » See also: SK Hynix Earnings: The Secret Behind the 72% Margin

Mew

Master, I will start with the portfolio structure and the value chain. The figures below are mainly based on BlackRock's iShares fact sheets as of March 31, 2026. ETF holdings can change over time.

• EWT: This is a Taiwan equity ETF, but in practice it is heavily tilted toward TSMC and Taiwan's IT hardware ecosystem. As of the end of March 2026, TSMC accounted for 21.67% of the fund, while information technology accounted for 69.39%.
• EWT's supply-chain role: Beyond TSMC, top holdings include Delta Electronics, Hon Hai Precision, MediaTek, ASE Technology, Accton, and Unimicron. Foundry, power components, assembly, networking, and packaging all connect directly to the physical AI server stack.
• EWY: This is a South Korea equity ETF, but Samsung Electronics and SK hynix dominate the portfolio. As of March 31, 2026, Samsung Electronics represented 22.35% and SK hynix represented 18.78%, for a combined 41.13%.
• EWY's supply-chain role: Information technology accounted for 44.91% of the fund. EWY is therefore highly sensitive to HBM, server DRAM, and high-performance storage cycles tied to AI accelerators.
• Valuation: On the same fact-sheet basis, EWT traded at a P/E of 21.37x and EWY at 16.99x. Compared with an estimated Nasdaq 100 P/E of about 31.93x on May 12, 2026, these ETFs carry a lower valuation label than the U.S. big tech basket.

The point is straightforward. U.S. big tech designs AI chips and deploys cloud infrastructure. Taiwan manufactures and packages many of the most difficult chips. Korea supplies the high-bandwidth memory that sits beside them. AI may look like abstract software in the cloud, but in reality it is a hot, expensive, electricity-hungry machine.

Kurumi

My Lord, this is exactly the point! Everyone keeps staring at NVIDIA and asking, "Who wins the AI chip war?" But Kurumi thinks that question is only half complete. Devilish!

No matter who wins the AI chip design war, the hardest manufacturing and memory bottlenecks do not disappear easily!

Google has TPU, Amazon has Trainium, and Meta and Microsoft are pushing deeper into custom ASIC strategies. AMD is chasing NVIDIA too. But where do all these chips go before they become real products?

Advanced nodes and leading-edge packaging still rely heavily on the TSMC-centered Taiwan supply chain, while HBM remains critical for making AI accelerators perform. Even if there are multiple winners in chip design, the bottleneck still narrows into a small set of physical gates. Devilish!

First, EWT is a tollgate on the AI chip factory.

TSMC's strength is not just wafer volume. It is advanced nodes, yield, customer trust, packaging such as CoWoS, and the surrounding component ecosystem moving together. Whether the chip comes from NVIDIA, Broadcom, Apple, or a hyperscaler, the most difficult silicon often leads back to Taiwan's manufacturing ecosystem.

Second, EWY is a compressed bet on the AI memory bottleneck.

A GPU can be powerful, but it cannot perform properly if data cannot move fast enough. HBM is a strategic component beside AI accelerators, and when server DRAM and enterprise SSD demand move in the same direction, Korean memory makers gain serious operating leverage.

TrendForce expects the three major memory suppliers to begin HBM4 mass production in 2026. Procurement shares can still shift with customer qualification and yield, but that uncertainty is exactly why HBM is becoming far more strategic than ordinary commodity memory.

Third, these ETFs offer AI hardware exposure at lower valuations than U.S. big tech.

That does not mean they are simply cheap. The AI supply-chain narrative is already reflected in prices. Still, EWT and EWY trade at lower P/E ratios than the Nasdaq 100, and their P/B profiles differ sharply from U.S. mega-cap software platforms.

My Lord, this is not a one-stock gamble on a single AI chip winner. It is a way to own the manufacturing, packaging, memory, and server-component bottlenecks that the whole AI industry needs. Devilish!

💖 Kurumi's Heart-o-Meter Score: 88/100

AI is not magic. It runs on factories, electricity, memory, and physical infrastructure. EWT and EWY are a way to own the narrow gates of that infrastructure!

Mikael

Kurumi, the logic is compelling. But human, a good narrative and a good investment outcome are not the same thing. When a country ETF trades at a discount to core U.S. indexes, there is usually a reason.

First, geopolitics is not decoration. It is part of the price tag.

The Taiwan Strait is the largest risk for EWT. Even without a full-scale conflict, military exercises and blockade fears can move foreign capital quickly. TSMC's technology may be world-class, but ports, electricity, logistics, insurance, and customer orders all matter. Markets react before the worst case becomes reality.

Korea is not a risk-free market either. Korean Peninsula geopolitics, currency swings, export cycles, and China-linked demand all matter. It is risky to treat EWY as simply "the Korean AI ETF."

Second, supply-chain reshoring is slow, but persistent.

The U.S. and Europe know very well that AI semiconductor supply chains are concentrated in East Asia. That is why they are pouring subsidies and policy support into foundries, packaging, memory, and power infrastructure.

It will be difficult to fully replace Taiwan and Korea's yield, speed, and ecosystem in the short run. But investors do not only look one year ahead. If alternative packaging and local capacity improve over the next five to ten years, part of today's supply-chain premium could be diluted.

Third, semiconductors are still cyclical.

Even if AI demand is structural, customer CAPEX is not infinite. If big tech slows data-center spending, AI monetization takes longer than expected, or new capacity arrives at the same time across the industry, pricing can move quickly.

EWY is especially sensitive to the Korean memory cycle. Memory can produce stunning profits in an upcycle, but when supply rises and prices turn, those profits can disappear fast.

Fourth, do not mistake an ETF label for broad diversification.

EWT is highly concentrated in TSMC and Taiwan IT hardware. EWY has more than 40% in Samsung Electronics and SK hynix. These are less like broad country baskets and more like concentrated bets on a few large companies and one powerful industrial cycle.

🚨 Mikael's Risk Score: 80/100

Human, EWT and EWY can be attractive tactical assets. But they should not be confused with core holdings like SPY or QQQ that investors can accumulate without much thought. These funds combine AI supply-chain power with geopolitics and semiconductor-cycle volatility.

Kurumi

Mikael, the geopolitics argument sounds too frightening by itself! If TSMC in Taiwan or Korea's semiconductor factories stop, U.S. big tech, global cloud, autos, and smartphones all shake together. That is why the Silicon Shield argument exists. These assets are so important that nobody can touch them lightly! Devilish!

Mikael

That argument matters. But it is not a perfect shield. Markets do not need an actual war to fall. If investors think the probability of a severe event has moved from 1% to 5%, prices can move violently.

Political decisions are not always driven by economic cost-benefit analysis. An investor should not bet an entire portfolio on the idea that "because everyone would lose, it cannot happen."

Mew

Both views matter. Kurumi's point is that the physical AI bottleneck is deeply tied to Korea and Taiwan. That is not just a theme. It is a structure built on manufacturing capability, customer qualification, yield, packaging, and memory supply.

Mikael's point is that owning the bottleneck does not automatically mean owning a stable asset. The more important the supply chain becomes, the more exposed it becomes to geopolitics, policy pressure, and customer diversification efforts.

So the character of EWT and EWY is clear. Rather than treating them like the center of a portfolio, it is more realistic to view them as satellite tactical assets tied to the AI hardware cycle.

The key indicators are TSMC's advanced-node and CoWoS guidance, Samsung and SK hynix's HBM4 qualification and supply plans, and U.S. big tech data-center CAPEX. If all three remain strong, the EWT and EWY narrative stays alive. If one breaks, valuation pressure can arrive quickly.