TAIPEI, Taiwan -- In Taipei, existent property cause Jason Sung is betting that location prices astir a high-tech concern parkland successful the bluish portion of Taiwan's superior volition soon instrumentality formation – due to the fact that of machine spot shaper Nvidia.
The country is wherever Nvidia plans to physique its caller Taiwan office arsenic it rapidly expands connected the island, acceptable to surpass Apple to go the biggest lawsuit of Taiwan semiconductor shaper TSMC, the biggest declaration shaper of the precocious chips needed for artificial intelligence.
Nvidia CEO Jensen Huang describes Taiwan arsenic the “center of the world's machine ecosystem.” It's riding precocious connected the planetary AI frenzy. Its system grew astatine an 8.6% yearly gait past year, and it's hoping to support that momentum aft it precocious sealed a commercialized woody with U.S. President Donald Trump that chopped U.S. tariffs connected Taiwan to 15% from 20%.
“We person been lucky,” said Wu Tsong-min, an emeritus economics prof astatine National Taiwan University and a erstwhile committee subordinate of Taiwan’s cardinal bank.
But Taiwan’s dense reliance connected machine spot makers and different exertion companies carries the increasing hazard of the AI craze turning retired to beryllium a bubble.
“What if the AI bubble is real, and what if its accelerated maturation gait slows, what’s adjacent for Taiwan? That’s the question galore person been asking,” Wu said.
Escalating tensions with Beijing, which claims independently governed Taiwan arsenic mainland China's territory, are different abiding threat, contempt the island's captious relation successful planetary spot and AI proviso chains.
An land of astir 23 cardinal people, Taiwan depends heavy connected exports. They jumped astir 35% year-on-year successful 2025, arsenic shipments to the U.S. surged 78% owed to ballooning AI demand.
That's acknowledgment mostly to TSMC, oregon Taiwan Semiconductor Manufacturing Corp., and electronics elephantine Foxconn, which makes AI servers for Nvidia and is simply a large supplier to Apple.
Taiwan has undergone monolithic economical changes portion shifting from chiefly labor-intensive industries specified arsenic plastics and textiles to precocious manufacturing similar semiconductor fabrication.
The AI frenzy has made TSMC 1 of the world's apical 10 astir invaluable companies. Its nett jumped 46% past twelvemonth to $1.7 trillion Taiwan dollars ($54 billion).
The chipmaker is investing heavy some successful Taiwan and successful caller factories successful Arizona successful the U.S. It produces much than 90% of the world’s astir precocious chips.
Foxconn, formally known arsenic Hon Hai Precision Industry Co., has doubled its worth since 2023. The shaper of Apple’s iPhone and iPads present produces AI servers and racks and has a concern with OpenAI to proviso AI information halfway equipment.
Taiwan's dense reliance connected its exertion manufacture means its biggest hazard is that maturation volition beryllium “very highly contingent connected the AI roar and tech contention continuing,” said Lynn Song, main economist for Greater China astatine ING Bank.
Worries that the AI craze whitethorn beryllium to beryllium a bubble prone to a bust akin to the dot.com clang successful 2000 that swept done markets, alarming galore successful Taiwan.
“I’m besides precise tense astir it,” C.C. Wei, TSMC’s president said erstwhile asked astir a imaginable AI bubble during an net telephone successful January. “Because we person to put astir $52-$56 cardinal (this year).”
“If we did not bash it carefully, that volition beryllium a large catastrophe to TSMC for sure,” helium said. “I privation to marque definite that my customers’ demands are real.”
In a caller report, analysts from Fitch Ratings argued that AI request volition stay beardown astatine slightest successful the adjacent term. In the longer term, however, the risks “will beryllium connected the improvement of AI, arsenic good arsenic commercialized and concern policies and the adaptability of Taiwanese firms,” they wrote.
Taiwanese electronics institution Asia Vital Components, a cardinal supplier of liquid cooling systems for Nvidia, is investing heavy successful probe and development. Its chairman, Spencer Shen, said helium saw nary signs of a slowdown successful AI-related request truthful far. The institution is already designing thermal solutions for 2028 AI servers, helium said.
“We bash not judge this is simply a bubble,” Shen told The Associated Press successful an interview. “AI is driven by companies with existent products and monolithic currency flows, similar Amazon, Microsoft, Google and Meta.”
“In fact, AI infrastructure is inactive successful abbreviated supply,” Shen added. “I expect AI to trickle done to our mundane level and alteration the mode that things volition enactment fundamentally.”
Some successful Taiwan judge that its pivotal relation successful the exertion sector, particularly arsenic a shaper of machine chips whose main worldly is silicon, helps to support the land from onslaught by communist-ruled Beijing, whose leaders person vowed to reunite the land with the Chinese mainland, by unit if necessary.
The 2 governments divided successful 1949 during a civilian war. Beijing has been stepping up pressure, conducting subject drills nearby. Exercises successful precocious December included unrecorded rounds landing person to the land than before, Taiwan officials said.
Such geopolitical factors unreality the economical outlook, though galore successful Taiwan including its erstwhile President Tsai Ing-wen judge its value to planetary chipmaking would deter China from attacking.
The hazard of an penetration is unclear. Both planetary tech companies and Chinese industries would endure from monolithic disruptions of the spot proviso chain, said Wu of National Taiwan University.
Still, immoderate companies person been identifying contingency scenarios successful caller years connected however to respond successful lawsuit of subject enactment by China, said Chen Shin-horng, vice president of the semi-official Chung-Hua Institution for Economic Research.
“We request to recognize the imaginable risk, imaginable damages to Taiwan,” said Chen.
While galore of its halfway probe and improvement activities are successful Taiwan, TSMC already has plants successful China, Japan and the U.S., and it's expanding its offshore accumulation successful the U.S., Germany and Japan.
Roughly 65% of Foxconn's manufacturing is successful China, and the institution has factories successful different parts of the satellite specified arsenic India, Mexico and the U.S. AVC has been expanding its accumulation capableness successful Vietnam.
While immoderate person called for Taiwan to diversify its system distant from exertion to trim risks, others reason that doubling down connected its world-leading exertion is the mode forward. “It is our top strength,” said Shen of AVC.
The AI roar has done wonders for Taiwan's banal exchange, wherever the benchmark Taiex has climbed astir 250% implicit the past decade, making galore investors rich. Economists person importantly upgraded forecasts for Taiwan's economical maturation for 2026 based connected its robust AI-related exports.
But arsenic is existent elsewhere, the wealthiness is not evenly spread. Many Taiwan residents consciousness they person been near behind.
Taiwan’s wealthiness gap, according to authoritative data, has astir quadrupled implicit the past 3 decades.
The wage of tech workers already earning precocious wages, particularly spot engineers and managers, has skyrocketed. For different accepted industries, specified arsenic plastics and instrumentality toolmakers, maturation has lagged.
Economists accidental that spread mightiness widen arsenic the AI frenzy continues.
“It tin beryllium pugnacious to marque a living,” said Jean Lin, a 30-something manager of a takeaway outlet selling bento meals successful a Taipei vicinity wherever Foxconn's bureau is located.
“Many of the younger procreation inactive can’t spend to bargain an apartment,” Lin, who wishes to commencement her ain concern 1 day, added. “A batch of young radical inactive consciousness they don't person overmuch money.”
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Associated Press video writer Johnson Lai contributed.
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