AI spurs biggest foreign buying of Taiwan stocks in 20 years

Taiwan’s logic-heavy market dominated by advanced semiconductor producers is seen as a relative safe haven in the AI “scare trade.”

• Foreign investors bought $2.77B in Taiwan stocks, most since 2005
• Chipmakers seen as safe amid AI disruption fears
• TSMC now makes up 45 percent of the Taiex index

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Global funds snapped up Taiwanese stocks in their biggest one-day buying spree in two decades, signaling confidence that chipmakers will remain AI-boom beneficiaries, even as broader markets face growing fears of disruption.

Overseas investors bought a net $2.77 billion of Taiwan equities on Tuesday, the most since December 2005, according to data compiled by Bloomberg. The investment also marked a sixth straight day of buying by foreign funds.

The surge comes as global equities wobbled following a report from little-known Citrini Research that warned of a dystopian-like wave of AI-driven disruption. While investors have been steering clear of sectors seen as vulnerable, they’re doubling down on chipmakers viewed as the backbone of the AI buildout. Taiwan’s logic-heavy market dominated by advanced semiconductor producers is seen as a relative safe haven in the AI “scare trade.”

“Taiwan is the home of the global AI supply chain,” said Vey-Sern Ling, managing director at Union Bancaire Privee. “Its companies and stock market will continue to benefit as long as investors believe that AI is disruptive and hence indispensable to our future.”

At the current pace, Taiwan is on track for roughly $7 billion in foreign inflows this month, a contrast to the roughly similar amount that has been pulled from memory chip-focused South Korea over the same period.

The growing dominance of Taiwan Semiconductor Manufacturing Co. has underpinned the broader market, with TSMC now accounting for about 45% of the Taiex index, roughly triple its weighting a decade ago. The stock has surged about 30% this year, repeatedly notching fresh record highs.

The surge in equity inflows has also lent support to the Taiwanese dollar, though gains have been tempered by steady US dollar buying from local life insurers. The currency’s relative stability may also reduce the need for foreign investors to hedge their exposure.

Khoon Goh, head of Asia research at Australia & New Zealand Banking Group, said he doesn’t expect a significant pickup in currency hedging alongside the stock inflows.

“Equity investors typically do not hedge, unlike fixed-income investors,” Goh said, adding that limited hedging activity should allow the inflows to continue supporting the Taiwan dollar.