A Market on the Verge of New Records
Taiwan’s benchmark index is now widely expected to break the 30,000-point mark in 2026, extending a three-year run that has nearly doubled market valuations. The rally is anchored by unrelenting global demand for advanced chips and high-performance hardware—market segments that Taiwan dominates.
Foreign investors have been cautious, worried about stretched AI valuations. But domestic investors have continued buying aggressively, betting that Taiwan’s position at the heart of the global AI supply chain will sustain growth even if competition among chipmakers intensifies.
TSMC, the world’s top contract chip manufacturer, remains the cornerstone of this belief, while firms like Foxconn and Elite Material are expected to benefit from the next wave of AI-driven hardware demand.
Even AI Competition Helps Taiwan
A key source of global anxiety revolves around Nvidia’s long-term dominance, especially as Google’s tensor processing units (TPUs) emerge as a cheaper, increasingly competitive alternative to Nvidia GPUs.
Yet for Taiwan, this rivalry presents no downside. The island’s semiconductor ecosystem is deeply embedded in supply chains for both GPUs and TPUs—meaning whichever technology wins, Taiwanese companies remain indispensable suppliers of AI computing power.
“Taiwan is a major beneficiary of the AI market,” said Piter Yang, fund manager at Fuh Hwa Securities Investment Trust Co. “Being the world’s semiconductor hub gives it an unmatched structural advantage.”
Local investors, buoyed by this outlook, remain largely unfazed by AI bubble chatter or geopolitical tensions with Beijing—two factors that have often rattled offshore investors.
Valuations Remain Reasonable
Despite the rapid ascent, Taiwan’s stock valuations are still considered moderate. The market trades at a price-to-earnings ratio of 21, below those of the Nasdaq and the Nikkei. That has given analysts confidence that the rally is supported by genuine earnings strength rather than purely speculative enthusiasm.
“We are not worried about an AI bubble,” said Li Fang-kuo, chairman of Uni-President’s securities investment division. “Valuations remain comfortable.”
He noted that major U.S. tech giants boast margins above 70%, making today’s AI-driven market very different from the revenue-light, hype-driven dot-com era. Goldman Sachs analysts agree, calling current conditions “not a full-fledged bubble” and maintaining an overweight position on global tech.
Risks Remain—but the Order Books Are Strong
There are lingering concerns about the profitability of AI infrastructure, especially if margins compress and hyperscalers cut hardware orders. But Taiwan’s prominence in the AI supply chain and a robust order outlook suggest its tech sector still has several strong years ahead.
Goldman projects hyperscaler investment to rise significantly, reaching $552 billion in 2026 and $644 billion in 2027. The firm expects Taiwan’s main index to climb another 7% over the next 12 months, hitting 30,200 points.
Uni-President’s Li anticipates the index will reach 30,000 by the first half of next year, driven by TSMC, Foxconn, Elite Material, and other AI hardware champions.
“The structural demand story around AI and high-end semiconductors remains intact,” said Gina Kim of Nordea Asset Management. “The sector is poised to remain a long-term winner.”
Foreign Investors Are Still Fleeing
Taiwan’s strong performance in 2025—up 22%, on par with the Nasdaq—has come despite sharp foreign outflows. Offshore investors have sold T$533.8 billion ($17 billion) worth of Taiwanese shares this year, after dumping T$695.1 billion in 2024.
Analysts attribute the exodus to trade uncertainty, AI-related risk concerns, and profit-taking. Still, sentiment on the island remains buoyant. Taiwanese investors continue to see long-term opportunity where some foreign funds see risk.
HSBC strategists recently warned that Asian portfolios are overly concentrated—on average holding 10% in TSMC alone—and advised investors to diversify beyond crowded AI trades. Yet many remain convinced that no other market offers Taiwan’s unique blend of technical depth and supply-chain centrality.
“We remain confident that Taiwan is an irreplaceable part of the AI supply chain,” said Kieron Kader of Alquity. “The ecosystem’s proximity to TSMC creates a competitive moat that is very difficult to replicate.”
A Market Driven by Structural Strength
As global investors debate whether an AI bubble is forming, Taiwan’s local participants are looking at fundamentals—and liking what they see. With strong earnings, healthy order books, and unmatched semiconductor capabilities, the island’s stock market remains one of Asia’s most compelling long-term stories.