Taiwan’s AI-powered economic surge is unfolding in a narrow corridor: global chip demand is rising, and major tech companies are betting that advanced computing will keep expanding. In Taipei, a real estate agent is already linking higher home prices near a northern high-tech industrial park to Nvidia’s plans for a new Taiwan headquarters. The broader picture is that artificial intelligence has helped make Taiwan’s chip industry a central node in the technology boom, while also raising questions about whether the pace can last—and what happens if it does not.
Nvidia is preparing to build its new Taiwan headquarters as the company expands on the island and as it is set to surpass Apple to become the biggest customer of TSMC, according to the Associated Press. Nvidia CEO Jensen Huang has called Taiwan the “center of the world’s computer ecosystem.” The AP report said Nvidia has benefited from the global AI frenzy and that Taiwan’s growth is being shaped by the companies that produce and supply the advanced chips needed for artificial intelligence.
As part of that momentum, Taiwan recently got relief on tariffs tied to the island’s relationship with the United States. The Associated Press said Nvidia recently sealed a trade deal with U.S. President Donald Trump that cut U.S. tariffs on Taiwan to 15% from 20%, an adjustment that feeds into business confidence about cross-border costs. Wu Tsong-min, an emeritus economics professor at National Taiwan University and a former board member of Taiwan’s central bank, said: “We have been lucky.”
But Wu also pointed to a central risk: Taiwan’s heavy reliance on chip and technology firms could make growth highly dependent on whether the AI boom continues. Wu described the question as one many people in Taiwan have been asking, saying: “What if the AI bubble is real, and what if its rapid growth pace slows, what’s next for Taiwan? That’s the question many have been asking.” Analysts and executives interviewed for the AP story described that dependence as a vulnerability, even as the near-term outlook remains strong.
The AP report said Taiwan’s exports jumped nearly 35% year-on-year in 2025, as shipments to the U.S. surged 78% on expanded artificial-intelligence demand. TSMC and Foxconn—an electronics manufacturing giant that produces AI servers for Nvidia and supplies Apple—were identified as major drivers of the shift. Taiwan has also moved through an economic transition over time, shifting from more labor-intensive industries such as plastics and textiles toward advanced manufacturing including semiconductor fabrication.
The scale of the chip industry’s gains also appears in corporate results cited by the AP. The report said TSMC has become one of the world’s top 10 most valuable companies and that its profit jumped 46% last year to 1.7 trillion Taiwan dollars, or $54 billion. The AP report also said TSMC produces more than 90% of the world’s most advanced chips, while investing both in Taiwan and in new factories in Arizona in the United States.
Foxconn’s growth has also accelerated alongside the AI buildout, the AP report said, noting that the company has doubled its value since 2023. It now makes AI servers and racks and has a partnership with OpenAI to supply AI data center equipment. Still, economists said Taiwan’s biggest risk comes from the possibility that growth becomes “very highly contingent on the AI boom and tech race continuing,” with Lynn Song, chief economist for Greater China at ING Bank, quoted describing that dependence.
Some executives acknowledge the scale of the investments that artificial intelligence requires, even as they dispute the idea of a fragile bubble. In an earnings call in January, AP reported, TSMC chairman C.C. Wei said: “I’m also very nervous about it,” when asked about a potential AI bubble. Wei added that the company has to invest about $52-$56 billion “(this year),” and he warned that if the spending is not handled carefully it could become a “big disaster” for TSMC. Wei said he wants to ensure customers’ demands are real.
Other industry leaders argued that demand remains grounded in production of widely used technology rather than speculative excess. Spencer Shen, chairman of Taiwan-based Asia Vital Components, which makes liquid cooling systems for Nvidia, told the Associated Press the company does not believe AI is a bubble. Shen said in an interview: “We do not believe this is a bubble,” adding that AI is driven by companies with real products and massive cash flows. He also said, “In fact, AI infrastructure is still in short supply,” and he expects AI to “trickle through to our everyday level and change the way that things will work fundamentally.”
Geopolitics—rather than markets alone—adds another layer of uncertainty. The AP report said some in Taiwan see its chipmaking centrality, including silicon-related manufacturing, as a potential deterrent against attack by Beijing, whose leaders have vowed to reunite Taiwan with the mainland, by force if necessary. The two governments split in 1949 during a civil war, and Beijing has stepped up pressure through military drills nearby. The AP report said exercises in late December included live rounds landing closer to the island than before, with Taiwan officials describing them as such.
Even without assuming the likelihood of an invasion, the risks of disruption are clear to policymakers and executives. Wu said in the AP report that both global tech companies and Chinese industries would suffer from massive disruptions to the chip supply chain if hostilities broke out. The report also said companies have been identifying contingency scenarios in recent years, and it quoted Chen Shin-horng, vice president of the semi-official Chung-Hua Institution for Economic Research, saying: “We need to understand the potential risk, potential damages to Taiwan.”
The AI boom has also increased inequality at home, according to the Associated Press. The report said Taiwan’s wealth gap, using official data, has roughly quadrupled over the past three decades, and it described how tech workers who earn high wages—especially chip engineers and managers—have seen rapid gains. For other industries, including plastics and machine toolmakers, the growth has lagged, and economists warned the gap could widen as the AI frenzy continues.
Jean Lin, a 30-something manager of a takeaway outlet selling bento meals in a Taipei neighborhood where Foxconn’s office is located, told the AP: “It can be tough to make a living.” Lin added that many younger people cannot afford apartments and that “A lot of young people still can’t afford to buy an apartment,” while also saying “A lot of young people still feel they don’t have much money.” As Taiwan’s economy becomes increasingly tied to AI-linked exports and manufacturing output, the AP report shows how the benefits and the anxieties are landing unevenly.