Taiwan becomes the centre of America’s AI economy

As Chris Horton writes in The Wire China, Taiwan’s economy is again behaving like one of Asia’s old “tigers.” In the first five months of this year, Taiwan exported $116.1 billion in goods and services to the United States, compared with $105.5 billion from China, including Hong Kong. This is a symbolic moment. Taiwan has only 23.4 million people, while China has 1.4 billion. Yet, in the most important technological race of the decade, Washington is buying more from Taipei than from Beijing.

The reason is simple: artificial intelligence needs hardware, and Taiwan produces the most important hardware in the world. TSMC has become an indispensable company for Nvidia, Apple, Microsoft, Amazon Web Services, Google, Oracle, Meta and almost every serious player in the AI economy. The scale is enormous. American technology companies are spending hundreds of billions of dollars on AI infrastructure, and Taiwan is one of the main beneficiaries of this investment wave. In the first quarter, Taiwan’s economy grew by 14.6%, a level not seen for years.

This is not only economics. It is strategy. For years, Taiwan’s Democratic Progressive Party pushed the island away from excessive dependence on China and towards the United States. Fifteen years ago, more than 80% of Taiwanese outbound investment went to China. Today, according to the article, that figure is below 1%. This is one of the most important economic shifts in Asia. Taiwan is not only selling more to America. It is moving capital, technology, factories and political trust towards the American system.

TSMC is now the centre of this process. The company is the world’s sixth most valuable firm. Its market capitalisation is around $2 trillion, and it accounts for more than 44% of the value of the Taiwan Stock Exchange. Its planned investment in Arizona has risen to $265 billion, making it the largest foreign investor in the United States. This changes the political logic of Taiwan’s security. Any Chinese military action against the island would not only be a regional crisis. It would hit American companies, American investments, AI supply chains and the global technology sector.

But Taiwan also has weaknesses. Its energy system is under pressure from new chip factories, water security is becoming a problem, and society is ageing rapidly. At the same time, the military dimension is still not fully aligned with the economic one. The article points to delays in American arms deliveries, a $30 billion backlog of approved but undelivered systems, and disputes in Taiwan over defence spending. Taipei wants drones and air defence, drawing lessons from Ukraine, but domestic politics continues to slow the process.

We can clearly admit that Taiwan has become more important to the United States than many European capitals fully understand. It is not only about defending Taipei (democracy) against China. It is about chips, AI, drones, critical minerals, supply chains, investment and the future of American technological power. Taiwan’s strength gives it leverage, but also increases the risk because the more indispensable Taiwan becomes, the more any crisis around the island would become global within hours. At the same time, the greater the U.S. involvement near Taiwan, the smaller its involvement in Europe.