Taiwan Stock Index Plunges Over 1,100 Points; Watch Financial Risks in Tech Supply Chain Circular Financing

The Taiwan Weighted Index plunged over 1,100 points during trading on the 24th, with TSMC (2330-TW), the so-called 'national treasure mountain,' accounting for more than 470 points of the decline. The market is undergoing deleveraging pressure. On the same day, the Taiwan Institute of Economic Research (TIER) pointed out that financial risks across the AI supply chain are highly interconnected. Under conditions of high leverage, circular financing, and concentrated valuations, the productivity benefits of AI coexist with concerns over asset bubbles.

TIER explained that current AI investments resemble past innovation cycles in terms of expansion speed, funding scale, and market optimism. Within the industry, a closed-loop system has formed among large-scale cloud providers, chip manufacturers, and AI labs, involving mutual investment, procurement, and financing—leading to highly correlated financial risks across the supply chain.

TIER warned that as AI capital expenditures continue to exceed some companies' earnings and free cash flow, certain firms must rely on debt to fund investments. If future demand for computing power, profitability, or growth in end-use applications falls short of expectations, it could lead to slower capital spending, widening credit spreads, and declining revenues across the supply chain—placing greater pressure on highly leveraged AI labs, data centers, and infrastructure contractors.

Overall, TIER believes AI investments help boost productivity and support manufacturing and tech export momentum in economies like the U.S., Taiwan, and South Korea. However, the structural reliance on high leverage, circular financing, and valuations concentrated in a few large players increases the risk of synchronized corrections in stock prices and credit markets during market reversals—an important variable that requires ongoing monitoring.