AI, TSMC And Capital Flows: How Taiwan Pulled Ahead Of India In Market Valuation

Taiwan has overtaken India in total stock market value, driven largely by a powerful rally in Taiwan Semiconductor Manufacturing Company (TSMC), according to Bloomberg data. The island's total market capitalisation climbed to $4.95 trillion as of Monday, marginally surpassing India's $4.92 trillion. The development makes Taiwan the fifth-largest equity market globally, behind only the US, mainland China, Japan and Hong Kong. Taiwan's sharp rise has been largely powered by TSMC, the world's largest contract chipmaker, whose shares have surged 49% this year amid growing optimism around artificial intelligence. The company now represents around 42% of Taiwan's benchmark index, underlining the market’s heavy concentration around a single AI-linked company. The rise highlights the continued strength of the AI investment theme, which has sparked a global technology rally and disproportionately benefited markets closely tied to semiconductor manufacturing and AI infrastructure. Yi Ping Liao, fund manager at Franklin Templeton, said Taiwan's growing market value largely reflects its concentration in technology hardware companies. He said markets with lower exposure to AI-linked hardware ecosystems are increasingly being overshadowed by technology-heavy markets such as Taiwan and South Korea. Recent regulatory changes have also added support. Taiwan’s financial regulator recently raised the investment limit domestic funds can allocate to a single stock. Under revised rules, local funds investing only in Taiwanese stocks can hold up to 25% of their net assets in a company if its benchmark weighting exceeds 10%. Currently, only TSMC qualifies under the revised framework. According to a research note from JPMorgan Chase, the changes could potentially attract more than $6 billion of fresh inflows into Taiwan. While Taiwan moved ahead in market value, India continues to remain one of the world's fastest-growing economies. According to International Monetary Fund estimates, India's economy stands at around $4.15 trillion compared with Taiwan’s $977 billion economy. However, Indian equities have faced pressure this year amid persistent foreign fund outflows, high valuations and a weaker rupee. Higher energy costs and concerns over slower earnings growth have also weighed on sentiment. Global investors have sold nearly $24 billion worth of Indian equities so far this year as capital shifted toward AI beneficiaries in Taiwan and South Korea. Indian benchmark indices are down nearly 8% and are heading toward their first annual decline after a decade of gains. India's weight in the MSCI Emerging Markets Index has also fallen sharply to around 12% from nearly 19% last year. Alison Shimada, portfolio manager at Allspring Global Investments, said India had been largely overlooked for the better part of two years due to valuations. However, she noted that financialisation trends and increasing movement of household savings toward financial assets remain long-term positives for the market.