How AI helped Taiwan overtake India to become the world's 5th largest stock market

For years, India was seen as one of the world’s most exciting stock markets, backed by strong economic growth, millions of retail investors and a booming corporate sector. But in a surprising turn, Taiwan has quietly moved ahead of India in total stock market value, and the reason has a lot to do with artificial intelligence (AI).

Taiwan’s stock market capitalisation has climbed to nearly $4.95 trillion, slightly ahead of India’s $4.92 trillion, according to Bloomberg. The jump may appear surprising given Taiwan’s much smaller size and population. But global investors are currently chasing one big trend, i.e., AI and Taiwan is sitting right at the centre of it.

THE AI BOOM CHANGED EVERYTHING

Artificial intelligence has become one of the hottest investment themes in global markets. From chatbots to smart devices and data centres, AI requires powerful computer chips to function.

This sudden rush towards AI-related businesses has pushed investors to companies involved in semiconductor manufacturing — an area where Taiwan dominates.

As money flowed into AI-linked sectors, Taiwan emerged as one of the biggest winners.

THE TSMC EFFECT: ONE COMPANY DRIVING THE STORY

Much of Taiwan’s market rise can be linked to one company, i.e, Taiwan Semiconductor Manufacturing Company (TSMC).

Taiwan Semiconductor Manufacturing Company is the world’s largest contract chipmaker and plays a major role in producing advanced semiconductors used in AI systems.

The company makes chips for some of the world’s biggest technology firms, including Nvidia, Apple, Advanced Micro Devices and Qualcomm.

As demand for AI chips exploded, TSMC’s shares rallied sharply, lifting the broader Taiwanese market with it. In fact, the company now accounts for a large share of Taiwan’s benchmark stock index, showing just how strongly one company has shaped the country’s market value.

WHY INDIA FELL BEHIND

India still has a much broader stock market, more listed firms and a far bigger economy. However, investors have recently turned cautious.

Several concerns have weighed on Indian equities, including rising crude oil prices, weaker corporate earnings growth, a softer rupee and relatively expensive valuations in some sectors.

Foreign investors have also pulled money out of Indian markets, putting additional pressure on valuations.

Another major gap is technology exposure.

Unlike Taiwan, India does not yet have globally dominant listed semiconductor makers or AI hardware companies that can directly benefit from the current AI investment wave.

INVESTORS ARE REWARDING CHIP ECONOMIES

Taiwan may have a population of just around 23 million people, but it has built a powerful position in semiconductor manufacturing and electronics exports.

While India’s market is driven more by consumption, banking and domestic demand, Taiwan’s market is closely tied to global technology manufacturing.

At the moment, investors are heavily rewarding countries linked to AI infrastructure and chip production, and Taiwan is benefiting more than most.

CAN INDIA CATCH UP?

Experts believe India’s long-term growth story remains strong. However, in the short term, global money is clearly chasing AI and semiconductor opportunities.

If India expands its semiconductor ecosystem and builds globally competitive AI-linked companies, the gap may narrow in future.

For now, though, the AI-fuelled chip rally has helped Taiwan claim the position of the world’s fifth-largest stock market.