TAIPEI, Taiwan (AP) – Taipei real estate agent Jason Song is betting that computer chip maker Nvidia will soon cause home prices to soar around a high-tech industrial park north of Taiwan’s capital.
This area is where Nvidia plans to build its new company. Taiwan It is expected to become the biggest customer of Taiwanese semiconductor maker TSMC, the largest contract manufacturer of advanced chips needed for artificial intelligence, which is rapidly expanding on the island and is expected to surpass Apple.
Nvidia CEO Jensen Huang describes Taiwan as “the center of the world’s computing ecosystem.” We are capitalizing on the global AI craze. its economy grew rapidly Annual rate of 8.6% We hope to continue the same momentum last year. trade agreement US President Donald Trump has lowered tariffs on Taiwan from 20% to 15%.
“We were lucky,” said Wu Tsung-ming, professor emeritus of economics at National Taiwan University and former board member of Taiwan’s central bank.
But Taiwan’s heavy dependence on computer chip makers and other technology companies raises the risk that the AI boom could turn into a bubble.
“What happens if the AI bubble is real, and what happens next for Taiwan once its rapid growth slows? That’s the question on many people’s minds,” Wu said.
Intensifying tension Despite Taiwan’s key role in global chip and AI supply chains, another persistent threat is its relationship with the Chinese government, which claims it is an independent territory within mainland China.
Taiwan’s lead in chip manufacturing
Taiwan, an island of about 23 million people, relies heavily on exports. In 2025, shipments to the U.S. increased by 78% due to expanding demand for AI, soaring nearly 35% year-on-year.
It’s mainly thanks to the following TSMCTaiwan Semiconductor Manufacturing Corporation, and electronics giant Foxconn make AI servers for Nvidia and are major suppliers to Apple.
Taiwan has experienced major economic changes as it transitions from primarily labor-intensive industries such as plastics and textiles to advanced manufacturing such as semiconductor manufacturing.
The AI craze has made TSMC one of the top 10 most valuable companies in the world. Profits rose 46% last year to NT$1.7 trillion ($54 billion).
Chipmakers are investing heavily in both Taiwan and Taiwan. New factory in Arizona The United States produces more than 90% of the world’s most advanced chips.
foxconnThe company, officially known as Hon Hai Precision Industry Co., has doubled in value since 2023. Apple’s iPhone and iPad makers are currently producing AI servers and racks. Partnership with OpenAI Supply AI data center equipment.
Lin Song, chief economist for Greater China at ING Bank, said Taiwan’s heavy dependence on the technology industry is the biggest risk, meaning its growth is “very much dependent on the AI boom and the continuation of technology competition.”
Does the risk of an AI bubble remain?
Concerns that the AI boom will become a reality bubble This led to a bankruptcy similar to the dot-com crash that swept the market in 2000, and made many people in Taiwan nervous.
TSMC Chairman CC Wei was asked about the possibility of an AI bubble at an earnings conference in January and said, “I’m also very worried about it.” “Because we have to invest about $52 billion to $56 billion[this year].”
“If we don’t handle this carefully, it will definitely be a disaster for TSMC,” he said. “We want to make sure that the customer’s request is genuine.”
In a recent report, Fitch Ratings analysts argued that demand for AI remains strong, at least in the short term. But in the long term, the risks “will depend on the evolution of AI, trade and investment policies, and the adaptability of Taiwanese companies,” they write.
Taiwanese electronics company Asia Vital Components, a major supplier of Nvidia’s liquid cooling systems, has invested heavily in research and development. Spencer Shen, the company’s chairman, said there are no signs of slowing down in AI-related demand so far. He said the company is already designing thermal solutions for AI servers in 2028.
“We don’t believe this is a bubble,” Shen said in an interview with The Associated Press. “AI is being driven by companies like Amazon with real products and huge cash flows. microsoftGoogle and Meta. ”
“In fact, AI infrastructure is still lacking,” Shen added. “I hope that AI will permeate our daily lives and fundamentally change the way things work.”
Taiwan has a “silicon shield” against China
Some in Taiwan believe that the island’s pivotal role in the technology sector, particularly as a maker of silicon-based computer chips, helps protect the island from foreign attack. communist-controlled Chinese government leaders have vowed to reunite the island with mainland China, by force if necessary.
The two governments split in 1949 during a civil war. Beijing is stepping up pressure, Military training is held nearby. Including exercises in late December Live ammunition lands nearby Taiwanese officials say they are now closer to the island than before.
Although these geopolitical factors cloud the economic outlook, many in Taiwan, including former President Tsai Ing-wen, believe the island’s importance in global semiconductor manufacturing will deter Chinese aggression.
The risk of invasion is unknown. National Taiwan University’s Wu said both global tech companies and Chinese industry will experience major disruptions to their chip supply chains.
Still, some companies have in recent years identified contingency scenarios for how they would respond in the event of military action by China, said Chen Xinghong, deputy director of the semi-governmental China Economic Research Institute.
“We need to understand the potential risks and potential damage to Taiwan,” Chen said.
Although much of TSMC’s core research and development activities are in Taiwan, TSMC already has factories in China, Japan, and the United States, and is expanding offshore production in the United States, Germany, and Japan.
About 65% of Foxconn’s manufacturing takes place in China, and the company also has factories in other parts of the world, including India, Mexico and the United States, and AVC is expanding production capacity in Vietnam.
Although there are voices calling for Taiwan to diversify, economy Some say we should abandon technology to reduce risk, while others argue that doubling down on world-leading technology is the way forward. “That’s our biggest strength,” says AVC’s Shen.
Some people in Taiwan are left behind
The AI boom has had a staggering impact on the Taiwan Stock Exchange, with the benchmark TaiEx up nearly 250% over the past decade, making many investors rich. Economists have significantly revised upward their economic growth forecasts for Taiwan in 2026, based on Taiwan’s robust AI-related exports.
But as elsewhere, wealth is not evenly distributed. Many Taiwanese residents feel left behind.
According to official data, the gap between rich and poor in Taiwan has nearly quadrupled in the past 30 years.
Salaries are skyrocketing for already highly paid tech workers, especially chip engineers and managers. Growth in other traditional industries, such as plastics and machine tool manufacturers, has been slower.
Economists say the gap could widen further in the future. AI craze Continue.
“It can be difficult to make a living,” said Jean Lin, a manager in her 30s at a takeout shop that sells boxed lunches in the Taipei area, where Foxconn’s offices are located.
“Many of the younger generation still cannot afford to buy an apartment,” added Lin, who hopes to start her own business one day. “Many young people still feel they don’t have money.”
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Associated Press video journalist Johnson Lai contributed.
