On April 27, Taiwan's benchmark stock index broke through the 40,000-point barrier for the first time, carried upward by a surge in TSMC's share price. It looked, on the surface, like a national celebration of shared prosperity. It was not. Beneath the headlines lies a more uncomfortable truth: the country's capital, talent, and resources are being relentlessly pulled toward the AI industry — and almost everything else is being left behind.
Those who bought AI stocks have made fortunes. Those who work in AI — TSMC employees chief among them — are earning starting salaries four to five times higher than the average new graduate entering any other field. The company has effectively captured the top tier of Taiwan's science and engineering talent. The result is a country cleaving in two: those connected to AI, and those who are not.
Taiwan's political leaders can no longer afford to simply celebrate how much GDP growth and stock market performance AI has generated. They need to answer a harder question honestly: strip away AI, and what does Taiwan's economy actually look like? What kind of lives are people living who have no connection to this industry?
This is not alarmism. Former Interior Minister Li Hung-yuan (李鴻源) recently argued that Taiwan is exhibiting a textbook case of what economists call "Dutch disease" — adapted to its specific conditions. He calls it "Taiwan's disease." TSMC's extraordinary success has concentrated elite talent, capital, land, and electricity within a single sector, quietly masking the slow deterioration of traditional industries and small businesses across the rest of the economy.
TSMC Accounts for 44% of Taiwan's Stock Index — and Half of Listed Companies Are Losing
When the index crossed 40,000 points on April 27, TSMC hit a historic high of NT$2,330 per share — a figure that happens to match its own stock ticker number. TSMC alone accounts for 44.3% of the weighting in Taiwan's benchmark index, meaning one company has been effectively pulling the entire market upward.
Behind this headline performance lies a deeply uneven picture. Some AI-linked stocks are trading at price-to-earnings ratios above 500 times — a clear sign the market has shifted from investment to speculation. Of the 1,870 companies listed on Taiwan's exchanges for more than 52 weeks, more than 1,021 — over half — remain below their one-year moving average. Investors holding AI stocks have prospered; those holding traditional industry stocks have spent the past year largely in the red.
Consider a direct question: if you removed TSMC and every AI-related stock from the index, what would Taiwan's market look like?
The answer is: badly. TSMC alone contributes roughly 44.3% of the index's weighting. Remove it, and the 40,000-point index is immediately cut in half. Add in the broader AI supply chain — Hon Hai, Quanta, Delta Electronics, MediaTek — and those stocks together account for more than 60% of the index. What remains is Taiwan's traditional industries and small and mid-sized enterprises: thin trading volumes, depressed valuations, capital flight. The market that looks like the world's most exciting AI play would revert instantly to a slow-growth, mid-sized exchange with little to attract global attention. The current bull market has illuminated only a narrow slice of Taiwan's listed companies.
Now consider a second question: nearly every salaried worker and retiree in Taiwan seems to regret not having bought TSMC earlier. Is that a healthy sign for the economy?
It is not — and it is a more serious warning than the market concentration alone. When an entire society's hopes for upward mobility are pinned on having picked the right stock at the right time, rather than on creating real value through work and enterprise, something has gone wrong. Wealth creation has become a spectator sport: a few bake the pie, and everyone else scrambles for a slice. The collective regret over missed stock gains fuels speculative excess, crowds out productive investment, and deepens social division — shifting the fault line from rich versus poor to "bought early versus bought late." Lasting prosperity cannot be built on that foundation.
This extreme concentration in capital markets — the bubble dynamics, the speculative mindset — is a direct consequence of AI's gravitational pull on Taiwan's resources. Remove AI, and the stock market would not collapse, but it would return to a more dispersed, less volatile norm: modest index gains, fewer wild divergences between winners and losers, and the underlying structural weaknesses of the economy laid bare.
Strip Out AI, and Taiwan's Economy Looks Very Different
Taiwan's politicians cannot continue to serve as cheerleaders for the AI economy, citing index highs and export figures as evidence that the country is thriving. They must answer the harder questions directly: what does someone's life actually look like if they have no connection to AI? What does the economy look like without it?
The honest answer is that Taiwan would not be left with nothing — but it would lose its dominant engine. What remains is a dispersed network of small and mid-sized enterprises and traditional industries: a more evenly distributed but more slowly growing economy, with structural challenges — including the K-shaped divide between AI beneficiaries and everyone else — no longer obscured by the sector's dazzling performance.
TSMC is Taiwan's irreplaceable anchor in the global technology supply chain. That is not in question. But there is a harder truth that must be acknowledged: even the most powerful single engine cannot sustain an entire country's long-term prosperity on its own. Taiwan needs not a rejection of AI, but a deliberate strategy that allows the gains from this technological era to extend beyond the narrow elite currently capturing them. The goal is to make AI's advantages a national opportunity — not a private privilege.
Taiwan will only close its K-shaped divide when its leaders stop celebrating what AI has delivered and start honestly reckoning with what the country looks like without it. That reckoning is where a more durable prosperity has to begin.
