Since the artificial intelligence craze invaded the markets, Taipei has been experiencing a massive and unusual influx of capital. Eager to capitalize on the strength and prospects of Taiwan Semiconductor Manufacturing Company, and seduced by the transparency of the stock market, domestic and international investors are flocking to the country's ETFs: in one year, the amounts invested in these vehicles have grown by 77%, reaching $145.8 billion in March 2024.

While Taiwanese industry boasts a number of nuggets, such as electronics assemblers Foxconn and Pegatron, it's mainly TSMC, the specialist in 3-nanometer or smaller chips, that is driving the indices upwards.

Weighing in at over 52% of the FTSE TWSE Taiwan 50 and 48% of the MSCI Taiwan at the end of April, the Apple and Nvidia supplier is driving the performance of local indices. It is the main link in the global supply chain for artificial intelligence: 92% of the cutting-edge semiconductors used in the United States come from the Taiwanese foundry's factories.

Alongside it are a handful of other companies operating in the same sector, such as MediaTek, Quanta Computer, Delta Electronics, United Microelectronics, Realtek Semiconductor and Wistron Corp. Technology companies account for 73% of the Taiwanese market's main index and 77% of its counterpart MSCI. And semiconductor players supply 60% of the world's requirements.

This overweighting is not without risk. The market is heavily dependent on the frenzy surrounding the AI bubble, whose bursting could be extremely damaging, and on exports linked to this industry. In addition, the country's entire economy is under a major sword of Damocles: geopolitical tensions with neighboring China, which is enviously eyeing the small island state.