While memory chip stocks are driving massive profit growth in the Korean market, there is still over 40% earnings growth in the rest of the market, excluding semis. This non-chip growth is fueled by strong global themes in shipbuilding, power equipment, defense spending, and the popularity of "K-culture."

In a stunning geopolitical shift, US imports from Taiwan (a nation of <30M people) have surpassed those from mainland China as of early 2024. This dramatic change is driven by the AI boom and soaring demand for TSMC's advanced chips, fundamentally re-weighting US economic dependencies in Asia.

While both Korea and Taiwan benefit from the AI boom, Korean large-caps have seen more explosive earnings growth. This is due to a key strategic difference: Korean memory makers have leveraged supply shortages to significantly increase prices, leading to earnings estimates multiplying 5-6x. In contrast, Taiwanese firms have shown more pricing discipline.

The powerful earnings growth story for North Asian markets like Korea and Taiwan is driven by the durable AI theme, not cyclical factors. Their role as essential suppliers of semiconductors for the AI supply chain provides a structural tailwind that should endure beyond the current geopolitical conflict, assuming a global recession is avoided.

The memory market is projected to see unprecedented growth, with 2026 revenues expected to increase by roughly $600 billion in a single year. This incremental growth alone is larger than the entire annual market for smartphones, PCs, or servers, highlighting the massive economic shift driven by AI infrastructure.

The massive, AI-driven surge in the stock market creates a perception of economic strength. This provides political leaders with the "cloud cover" to pursue controversial or authoritarian actions that would face intense scrutiny and opposition during an economic downturn.

The robust performance of the AI sector buoys the stock market, creating a positive economic narrative. This economic stability acts as 'cloud cover,' distracting the public and enabling politicians to pursue controversial or anti-democratic actions without immediate economic backlash that would otherwise trigger public outrage.

North Asian markets (Korea, Taiwan) are dramatically outperforming South Asia (Indonesia) due to a dual dynamic. North Asia is insulated from energy price shocks by its wealth and buffer stocks, while also being the primary beneficiary of the global AI technology boom, a trade South Asia largely lacks.

The current market boom, largely driven by AI enthusiasm, provides critical political cover for the Trump administration. An AI market downturn would severely weaken his political standing. This creates an incentive for the administration to take extraordinary measures, like using government funds to backstop private AI companies, to prevent a collapse.