Taiwan & TSMC: linked destinies

The Taiwan stock market is doing like a charm. With the exception of Nasdaq, it outperforms its major global counterparts, whether American, Chinese or European, with TSMC in the role of locomotive.

Since the artificial intelligence rage took over the markets, Taipei has faced a massive and unusual influx of capital. Eager to benefit from the vigor and prospects of Taiwan Semiconductor Manufacturing Companyand seduced by the transparency of the stock market, national and international investors are flocking to the country’s ETFs: in one year, the amounts invested in these vehicles increased by 77%, reaching $145.8 billion in March. 2024.

If Taiwanese industry prides itself on having some gems, such as electronic assemblers Foxconn And Pegatronit is essentially TSMC, the specialist in chips of 3 nanometers or less, which is driving the indices upward.

Weighing more than 52% of FTSE TWSE Taiwan 50 and 48% of MSCI Taiwan at the end of April, the supplier to Apple and Nvidia rains or shines on the performance of local indices. He alone is the main link in the global artificial intelligence supply chain: 92% of cutting-edge semiconductors used in the United States come from the Taiwanese foundry’s factories.

He has at his side a handful of running mates operating in the same sector, such as MediaTek, Quanta Computer, Delta Electronics, United Microelectronics, Realtek Semiconductor And Wistron Corp, but whose striking force is incommensurate with the giant. Technology companies thus represent 73% of the main index of the Taiwanese market and 77% of its counterpart MSCI. And semiconductor players supply 60% of global needs.

This overweighting is not without risk. The place is heavily dependent on the frenzy surrounding the AI ​​bubble, the explosion of which could be extremely damaging, and on exports linked to this industry. The country’s entire economy is also under a major sword of Damocles: geopolitical tensions with neighboring China, which eyes the small island state with envy.

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