Taiwan's stock market could see a sharp pullback in the coming months, which is bad news for investors still riding the AI rally but potentially a buying opportunity for those waiting on the sidelines.

• A market analyst warns heavy margin debt could worsen any downturn, with the index possibly dropping to the 35,000–37,000 range after peaking near 50,500–52,500, with the correction possibly starting as early as November around Taiwan's local elections, or stretching into the first half of next year.
• AI-driven server demand is boosting revenue at major contract manufacturers like Foxconn, Quanta, and Wistron, but their profit margins are actually shrinking as chip and parts costs rise, meaning more sales don't necessarily mean more profit.
• The analyst flagged high-flying stocks with stretched valuations, like server rail maker King Slide, as vulnerable if the market reprices growth stocks lower, even if their earnings keep growing.
• TSMC remains a long-term favorite despite tech giants building their own AI chips in-house, since any advanced chip still needs TSMC's manufacturing, and Delta Electronics is seen as well-positioned on AI data center demand for power and cooling gear.
• The broader AI stock selloff rattled investors, but JPMorgan told clients the selling may be nearing its end, with excess leverage already cleared out since mid-September.

Outlook: Expect continued volatility with a possible deeper correction around the November election, though a rebound is possible once holiday trading disruptions pass and if margin debt cools off.