The AI investment mania currently gripping Taiwan's stock market is not seen by Wall Street analysts as a baseless bubble, but rather as built upon the robust fundamentals of hard technology manufacturing underpinning a global super-cycle of AI computing demand. Taiwan Semiconductor Manufacturing (TSM) and its extensive AI computing supply chain produce roughly 90% of the world's most advanced process chips, which are the critical underlying components for smartphones, laptops, robots, and especially the accelerating global expansion of AI data centers. Concurrently, Hon Hai Precision Industry Co., Ltd. and its supply chain represent the most crucial assemblers for AI server clusters for giants like NVIDIA Corporation and cloud providers such as Amazon.com, Inc.'s AWS and Microsoft Corporation's Azure. TSM and Hon Hai are thus viewed by investors as bellwethers for the AI computing supply chain. In other words, Taiwan has evolved from a traditional export-oriented market into a high-beta investment hub for the global AI computing infrastructure super-cycle.
Over the past year, Taiwan's benchmark stock index has surged over 100%, surpassing the markets of the UK, Canada, and India within weeks to become the world's fifth-largest stock market. This leap reflects global capital mapping the real value of the "AI computing arms race" supply chain—from U.S. mega-cap tech stocks, NVIDIA's Blackwell/Rubin computing chains, and the tech giants' record-breaking cloud capital expenditures—further onto Asia's most advanced chip processes, advanced packaging systems, and semiconductor/AI server manufacturing clusters. For top Wall Street analysts, the Taiwan market is becoming the frontline thermometer for gauging whether the AI data center capital expenditures of global tech giants are materializing as promised.
Should the AI capital spending slowdown feared by Wall Street materialize, leading to a cooling in chip/AI server orders or a dip in demand for advanced processes/packaging, a market pullback in Taiwan could be magnified exponentially by its high AI concentration. This scenario could potentially trigger the first domino in a global AI investment bubble burst. According to the latest calculations from Wall Street giant Goldman Sachs Group, Inc., the global AI capital expenditure baseline model is projected to grow from $765 billion annually in 2026 to $1.6 trillion annually by 2031, with cumulative spending from 2026-2031 estimated at approximately $7.6 trillion. U.S. data center power demand is forecast to rise from 31 GW in 2025 to 66 GW in 2027. Another Wall Street titan, Morgan Stanley, predicts that nearly $3 trillion in AI-related infrastructure investment will flow through the global economy by 2028, with over 80% of that spending still ahead.
Extreme Risk Appetite Fueled by TSMC's Dominance
According to the latest compiled statistics, for the first time since April 2022, the "average annual earnings" reported by companies in the MSCI Emerging Markets Index have surpassed the consensus analyst expectations set a year ago. Asian AI computing supply chain leaders like TSM, Hon Hai, SK Hynix Inc., and Samsung Electronics Co., Ltd. are driving this outcome. Asia hosts numerous AI computing infrastructure manufacturing firms, including core chipmakers like TSM and assemblers like Hon Hai, alongside memory leaders, MLCC giants, and PCB frontrunners. Consequently, Wall Street analysts view Asia's AI computing infrastructure supply chain as poised to be the biggest winner from the "AI disrupts everything" trend.
Currently, the strongest theme within AI investment is the "supply-constrained + high-technical-barrier" AI computing infrastructure manufacturing/contracting segment—namely advanced process foundry, advanced packaging, HBM/high-end server memory, critical AI server components, data center power, and liquid cooling/thermal management. This is because these areas translate the unit economics of AI training/inference systems into "compute power and energy consumption per token," and they are predominantly concentrated in Asia. From an engineering perspective on "AI factory" supercomputing projects, TSM sits at the core "physical bottleneck layer" of AI computing infrastructure: AI GPUs from NVIDIA/Advanced Micro Devices, Inc. (AMD), ASIC and networking chips from Broadcom Inc./Marvell Technology, Inc., AMD AI accelerators, and cloud providers' in-house ASICs all rely on advanced processes, advanced packaging, and high-yield mass production.
Information disclosed by TSM management at a recent shareholder meeting indicates that advanced processes and packaging will remain in short supply for years to come. This suggests AI data center construction is not a single-quarter procurement event but a multi-year capital expenditure cycle expanding from training GPUs to inference, agentic AI, robotics, autonomous driving, and sovereign AI. TSM itself emphasized in shareholder materials that it will continue investing in Taiwan's leading processes and advanced packaging, advancing multi-phase capacity builds for 2nm-class advanced processes to meet strong computing demand driven by AI.
However, the fundamental strength of TSM-led AI computing hardware manufacturing also brings high concentration risk. Tech firms account for about 20% of Taiwan's economic output but hold roughly an 80% weighting in the benchmark stock index, meaning the market has essentially been transformed into a high-concentration "AI semiconductor factor asset." As long as global cloud providers continue expanding AI data centers and demand for advanced GPUs and AI ASIC accelerators remains strong, Taiwanese equity assets will enjoy dual support from earnings expectations and valuation premiums. Yet, should the pace of AI capital expenditure slow to any degree, an overly leveraged Taiwan market pullback could be significantly amplified by its AI concentration, potentially becoming the first domino in a global AI investment bubble burst.
FOMO Sentiment in Overdrive: Investors Ramp Up Leverage
Some analysts have begun portraying Taiwan's stock market as a prime example of global AI bubble risk: a market that has doubled in a year, where tech stocks comprise about 80% of the index, and where margin buying has skyrocketed 160% over 12 months, with both retail and institutional investors increasing leverage. The truly dangerous variable is not whether Taiwan possesses a real AI computing industry moat, but whether households and financial institutions are chasing the same grand AI narrative with excessive leverage.
Compiled reports on leveraged investment activity highlight cases like 26-year-old Andy Cheng, who borrowed money on margin to hold about $60,000 in Taiwanese tech stocks while unemployed, claiming "buying any AI-related stock in Taiwan makes money." Another case is 39-year-old financial influencer Ada Hung, who for years avoided debt for investing but, after seeing friends' returns far outpace her own, borrowed NT$5 million (approx. $158,302) in May. Such cases illustrate a market psychology shifting from "belief in TSM's long-term fundamental competitiveness" towards "FOMO-driven extreme fear of missing out on wealth transition opportunities."
For investors wary of "AI bubble" rhetoric, leverage data is undoubtedly more alarming. Over the past 12 months, the amount investors have borrowed through local brokerages to buy stocks has surged 160%, nearing historical highs seen before the 2000 global dot-com bubble burst. This increase far exceeds the 50% rise in the final 12 months of the dot-com bubble and also surpasses the recent ~94% increase in margin financing in South Korea, another strong AI market in Asia. A soaring margin balance itself is not a crash signal, but when it resonates with a retail narrative of "any stock will go up," it indicates risk appetite has moved from fundamental re-rating into a leveraged chase phase of irrational exuberance.
The leverage frenzy is also beginning to strain financial system liquidity. Some brokerages have hit internal lending limits, forcing them to demand more collateral and raise interest rates. Investors rejected by brokerages have turned to bank loans or liquidated financial products to free up cash. More symbolically, the borrowing frenzy has become so intense and spread so deeply through the financial system that it recently disrupted a central bank debt auction. On June 3rd, there were insufficient buyers for all the debt on offer, a first-time occurrence, indicating the stock margin craze is no longer just an internal market phenomenon but is starting to affect fixed-income markets and financial system fund allocation.
Regulators Claim Control, but an AI Spending Slowdown Could Spill Over
Brokerages themselves are being drawn into this leverage expansion. To replenish working capital, Taiwanese brokerages have issued nearly $1.2 billion in bonds this year, over seven times the total for all of 2025, with some institutions also turning to the syndicated loan market. Simultaneously, stock trading default amounts in June have doubled to over a staggering NT$2 billion, hitting the highest monthly level since records began in 2019. While the market continues to rise, such figures are easily ignored; but a deep market correction could see defaults, margin calls, and forced selling form a classic cyclical amplifier.
Taiwan's financial regulators currently maintain that overall industry leverage is controllable. The Securities and Futures Bureau stated that, as of May, none of the 34 brokerages engaged in various margin financing businesses had breached regulatory limits, and stock market default amounts remain below 0.002% of all transactions. However, brokerages have begun proactively de-risking: some are cutting leverage ratios, suspending online loan applications, and adjusting interest rates and margin requirements. Industry sources note that margin loan rates have been raised by 0.2 percentage points or more, while unsecured loan rates using stocks and ETFs as collateral have seen increases of up to 1 percentage point—a clear risk repricing in a context where Taiwan's central bank benchmark rate is only 2%.
More critically, stress testing has entered the operational level for Taiwanese brokerages. Some institutions are simulating the impact on their loan portfolios if the market suddenly drops 20% or 30%. Brokerages including KGI Securities, Fubon Financial Holding Co., Ltd., SinoPac Holdings, and Cathay Financial Holding Co., Ltd. acknowledge having taken measures such as reducing leverage, adjusting rates, modifying margin requirements, or restricting unsecured loans for high-risk stocks. The financial system is not yet out of control, but risk management has shifted from "post-observation" to "pre-emptive fire prevention."
At the macro level, the tail risk is that if AI momentum suddenly recedes, the shock would not be confined to stock accounts. Alicia Garcia Herrero, Chief Economist for Asia Pacific at Natixis, notes potential spillovers could include brokerage stress, a decline in household consumption, and a hit to export growth. For an economy like Taiwan's, where tech has an extremely high market weight and household wealth effects are tightly bound to the external demand cycle, a stock market correction could transmit to the real economy through four channels: asset prices, consumer sentiment, financial intermediation, and export orders.
Taiwan is undoubtedly becoming the most archetypal dual-faced sample of the global AI super-bull market. On one side lies a formidable real-industry moat composed of the powerful AI computing supply chain linked to TSM, Hon Hai, and Wistron Corporation; advanced processes and packaging systems; and the tech giants' ever-larger AI data center capital expenditures. On the other side lies financial market fragility built on overheated retail FOMO sentiment, a暴涨的margin balance, brokerages borrowing to supplement capital, and rising default amounts. Institutions like Goldman Sachs still offer bullish outlooks, and most analysts expect the Taiwan market to continue rising in the coming months, suggesting the trend is not over. However, the true investment insight is that the stronger the fundamentals of AI-related assets, the more likely they are to be prematurely透支in an environment of low rates, high conviction, and high leverage. Whether Taiwan's AI super-bull market can continue depends not only on orders related to TSM-led AI chips and Hon Hai-led AI server clusters but also on whether the massive leverage exposure can be digested by the market without triggering forced de-risking.
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