The trading screens at a brokerage close to Zhongxiao East Road lit green just after Taipei’s opening bell, something that traders there hadn’t seen in years. Orders from foreign funds were piling up and rushing through the system. The biggest one-day haul since December 2005 occurred when foreign investors purchased a net $2.77 billion worth of Taiwanese stocks by the end of the session. If you ask around the market, the answer can be summed up in one word: compute.
Global financiers are placing a concentrated wager that Taiwan will be at the epicenter of the world’s growing demand for processing capacity for artificial intelligence. Taiwan Semiconductor Manufacturing Co., which today makes up approximately 45% of the Taiex index—roughly three times its weighting ten years ago—is at the center of it all. It’s difficult to ignore TSMC’s growing dominance.
| Category | Details |
|---|---|
| Market | Taiwan Stock Exchange (Taiex) |
| Record Inflow | $2.77 billion net foreign buying (largest since Dec 2005) |
| Key Company | Taiwan Semiconductor Manufacturing Co. (TSMC) |
| TSMC Index Weight | ~45% of Taiex |
| Major Clients | Apple, Nvidia, AMD |
| Reference Website | https://www.twse.com.tw |
This year, the company’s stock has increased by about 30%, establishing new records time and time again. The most cutting-edge semiconductors for Apple, Nvidia, and AMD are produced at its plants, which are busy day and night. Investors frequently bring up Taiwan in passing while discussing AI infrastructure.
The atmosphere of Hsinchu Science Park is thick with industry. Delivery vans drive by immaculate structures. White-coated engineers flaunt their badges as they pass through security checkpoints. Inside, enormous, nearly cathedral-sized equipment used for extreme ultraviolet lithography carve patterns that are undetectable to the naked eye. The global AI race is being materially built here. Investors appear to think that Taiwan’s equities market would rise as long as there is an increase in demand for computers.
The present influx is the sixth day in a row that overseas buyers have made purchases. Taiwan is expected to receive about $7 billion in foreign inflows this month if current trends continue. In stark contrast, a comparable quantity has escaped from South Korea, especially from brands that are memory-focused.
There is a slight change in those figures. Memory chips are subject to fluctuations in consumer electronics and inventory levels. AI models are powered by sophisticated logic circuits, which feel substantial. more fundamental. That’s the narrative capital is embracing, however.
Although gains have been restrained by consistent U.S. dollar buying from local life insurers, the Taiwanese currency has slightly risen in tandem with the equities increase. Analysts point out that currency stability lessens the need for foreign capital to engage in aggressive hedging. Although it may appear technical, that detail is important. Trust in the equities narrative can be strengthened by trust in the currency. However, it is impossible to overlook the concentration risk.
The market effectively becomes a leveraged wager on a nation’s fortunes when one business accounts for almost half of its benchmark index. Taiex prospers if TSMC prospers. The index may falter if it is affected by supply chain disruption, technological competition, or geopolitical tension.
That trade-off might be acceptable to international investors. Compute capability is not a luxury in a world where artificial intelligence is influencing everything more and more. Infrastructure is what it is. And a lot of it is produced in Taiwan.
A geopolitical undertone is also present. Taiwan has long been acknowledged for its strategic significance in the production of semiconductors. However, that importance has increased due to the AI growth. Washington, Beijing, and Brussels policymakers are aware that advanced processors are instruments of national and economic power rather than just being commercial goods.
As foreign investment pours into Taipei, it appears that markets are expressing confidence in both strategic imperatives and profitability growth.
Broader markets, however, remain uneasy. Beyond Taiwan’s boundaries, worries about possible upheaval, inflation volatility, and global growth are prevalent. There is a clear contrast: certainty here, prudence elsewhere.
It’s possible that some of this zeal is fueled by momentum. As TSMC’s market capitalization increases, passive funds are compelled to devote more capital due to its increasing weight in global indices. Self-reinforcing effects are possible. As prices rise, index weightings rise as well, drawing in greater flows. How long that positive cycle can last is still unknown.
Because it seems rooted in apparent demand, the computing narrative is potent. Data centers are growing. The complexity of AI models is increasing, necessitating exponentially more computing power. It appears that each subsequent version requires more silicon rather than less.
However, investors are often caught off guard by technological cycles. The course could be changed by architectural changes, efficiency gains, or legal restrictions. For the time being, those worries seem to be less important than the sudden increase in AI spending.
One may hear traders recounting the day’s results with a mixture of astonishment and satisfaction as they stand outside a brokerage office as the market ends. It’s a long period between records—20 years. The last similar shopping frenzy took place before smartphones revolutionized daily life, in a different technological period.
Though perhaps more revolutionary, the driver is less obvious this time. The processing levels underneath it are invisible, not a gadget you can hold.
Some claim that computation is the new oil. That comparison might not be accurate. However, the capital flows clearly show that international investors view Taiwan as the hub of the AI economy rather than as a peripheral emerging market.
Billions of dollars are currently casting their votes. Additionally, they are choosing silicon.
