Geopolitical tumult and economic uncertainty across the world failed in 2025 to shake investor confidence in equity markets, with Taiwan being one of the best examples of this phenomenon. The Taiwan Stock Exchange (TAIEX) set six records in 2025 and could soon overtake Canada’s stock market (TSX) to become the world’s No. 6 stock market by capitalization.
Taiwan Stock Exchange data showed that six key indicators reached all-time highs last year. These included the year-end benchmark index, average daily turnover, total market capitalization of listed firms, combined revenue of listed companies, funds raised through IPOs, and securities transaction tax revenue.
Some 2025 highlights: In the first 11 months of last year, total revenue generated by all listed companies hit a historic high of NT$42.89 trillion. The TAIEX closed the final trading session of last year at 28,963.6 points, while average daily turnover reached a record NT$416 billion (US$13.17 billion). Further, 45 companies applied to be listed in 2025, the highest number since 2008, while IPO fundraising reached a record NT$85 billion.
By the end of 2025, total market capitalization of listed companies reached NT$94.36 trillion, placing Taiwan eighth globally by market value. Meanwhile, the rally has extended into early 2026. When market cap rose to NT$99.6 trillion earlier this month, the TAIEX overtook France’s Paris Bourse to become the No. 7 market globally.
A key factor driving the TAIEX’s exceptional performance in 2025 was the global AI boom. This fueled massive demand for Taiwanese semiconductors, especially from tech giants like Nvidia, Broadcom, OpenAI, Google, Meta, and Micron.
Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest contract chipmaker, has played a central role in the TAIEX rally. Its stock price reached several all-time highs in 2025 and did so again on Jan. 16. TSMC is the top supplier of advanced chips (like 2 nm nodes) for AI data centers.
With the TAIEX showing no sign of slowing down, we wonder, how long can this rally go on? Surely, what goes up must come down—eventually.
To be sure, like the broader Taiwanese economy, the TAIEX is overly dependent on TSMC. The chipmaking giant represents a significant portion—ranging from 33% to 40%—of the index’s total market value. For many years, there have been concerns about the lack of diversification in the Taiwan stock market and potential vulnerability to AI market shifts or geopolitical events.
Taiwanese lawmakers have noted that the imbalance in the stock market reflects broader weaknesses in non-tech segments of Taiwan’s economy. “The market structure has lost its balance,” lawmaker Lin Te-fu in early January. “Many investors who do not hold TSMC cannot share in the benefits created by the TAIEX’s rise.” Lin further noted that 1,263 out of the 1,947 companies (64.87 percent) listed on the local main board and the OTC market still moved below their 240-day moving average, indicating a subpar performance.
Given TSMC’s and the broader Taiwan tech sector’s strengths, the TAEIX is likely to remain strong in the short to medium term. However, the risk of an AI market correction at some point is real, and that would have significant implications for Taiwan’s stock exchange.
The Bank of England, the IMF, and figures like Ray Dalio have warned that valuations for AI companies are reaching unsustainable levels, potentially creating a bubble. At the same time, many analysts question whether AI companies can generate enough revenue to justify the massive, multi-trillion-dollar investments in related infrastructure, such as data centers.
A bursting of the AI bubble could lead to a global recession and wipe out $20 trillion in U.S. household wealth and $15 trillion for foreign investors.
Even if the risk is mild to moderate, Taiwan should still brace for potential stock market shocks from an AI bubble bursting.