Taiwan’s economy is experiencing a significant surge driven by global demand for artificial intelligence chips, propelling its stock market to become the world's fifth largest this year.

Key Points

• Taiwan’s GDP grew by 12.92 percent in the second quarter of 2025, following a 13.69 percent increase in the first quarter.
• The island produces approximately 90 percent of the world’s advanced semiconductors, which are essential for powering leading artificial intelligence models.
• Taiwan recently surpassed China to become the third-largest source of United States imports, trailing only Mexico and Canada.
• A new trade agreement includes a $500 billion investment commitment from Taiwan to develop onshore manufacturing and technology infrastructure within the United States.
• Economic experts warn that reliance on the chip sector, an aging population, and geopolitical tensions with China pose long-term sustainability risks for the island.

Why it Matters

Taiwan’s rapid growth highlights the critical role of semiconductor manufacturing in the global AI-driven economy and the deepening trade integration between Taipei and Washington. However, the concentration of wealth in the tech sector and a massive trade surplus with the U.S. create potential for future political and economic instability.