Andy Cheng, a 26-year-old currently without a job, has tapped into some borrowed funds to invest $60,000 in Taiwanese technology stocks. His advice perfectly reflects the mindset of Taiwan’s 23 million people: “Buy any stock, and you will profit.”
Recently, an AI craze has swept stock markets globally—South Korea, China, the US—but it’s especially prominent in Taiwan, the world’s top manufacturer of the chips driving this technology.
Read: Taiwan surpasses India as the world’s fifth-largest stock market
Young investors are eagerly opening brokerage accounts, trading volumes are causing firm websites to struggle, and the Taiwanese market has surged over 100% in the last year. Despite a tech selloff impacting broader Asian markets on Tuesday, Taiwan’s market quickly rebounded, overtaking the UK, Canada, and India to become the world’s fifth-largest.
A significant portion of this increase, illustrated by Cheng’s situation, stems from extensive borrowing at very low interest rates. Many brokerage firms have reached their internal lending thresholds, resulting in higher collateral requirements and rising interest rates, according to insiders.
When unable to secure loans from their brokers, investors often approach banks for leverage, either taking out new loans or canceling other financial products to make cash available.
The sheer volume of borrowing led to a recent disruption at a central bank debt auction, where not enough buyers were present to absorb all the debt offered on June 3 for the first time.
This excitement alarms contrarians who view Taiwan as a crucial indicator of the rapidly inflating global AI bubble.
“Taiwan’s stock market is clearly overheated,” cautioned Dachrahn Wu, an economics professor at National Central University.
Read: Taiwan market cap exceeds $4 trillion amid AI boom, overtaking the UK
He worries that a sudden market downturn could result in “devastating losses” for inexperienced young investors who see stocks as an easy avenue for profit.
Cheng, however, remains unfazed. “It’s not a bubble,” he confidently states, leaning in to be heard over the excitement.
On a bustling weekday evening, Cheng dined at Pin Xian Rechao, a well-known stir-fry restaurant in southern Taipei that gained fame after Nvidia CEO Jensen Huang was spotted there.
Even after the benchmark index fell 3.5% earlier that day, the mood at Pin Xian was vibrant, with guests savoring specialties like deep-fried pork liver and pineapple shrimp balls.
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Jensen Huang serves food to patrons outside Pin Xian Rechao in Taipei. Image: Lam Yik Fei/Bloomberg
Throughout the establishment, diners buzzed about AI, the stock market, and the prospect of buying stocks at lower prices. In one corner, a middle-aged man zealously explained PE ratios and their application in selecting winning stocks.
During stock discussions, everyone at Cheng’s table looked to him for insights due to his background in accounting. He believes he has gleaned lessons from the dot-com boom of the 1990s and contends this rally is different. “This time, it’s distinct; it carries substance.”
Read: Bank of England warns that debt-fueled AI boom may unravel
This confidence is prevalent among bullish investors in Taipei.
Their optimism is anchored in the global dominance of Taiwan Semiconductor Manufacturing Co., bolstered by a broad network of companies that supply 90% of the world’s advanced chips—essential components for smartphones, laptops, robotics, and the expansive AI data centers emerging worldwide.
Taiwan Semiconductor Manufacturing’s facility in Hsinchu, Taiwan. Image: An Rong Xu/Bloomberg
However, if the AI expansion decelerates—something some Wall Street analysts foresee—the demand for these chips could also wane.
The current speculative fervor in Taiwan is nearing the intense levels observed during the dot-com era. In the past year, borrowing from brokerages for stock investments surged by 160%, approaching a historic peak last seen prior to the 2000 crash.
Read: AI’s $1.3 trillion future increasingly relies on Taiwan
This increase in margin debt exceeds the 50% rise recorded during the last year of the previous bubble. It even surpasses the 94% increase seen in South Korea, another key player in the AI landscape, where government initiatives have stimulated investor interest and pushed the market higher.
For many in Taiwan, this marks their first foray into borrowing to amplify investments.
“FOMO truly shaped my choices,” Ada Hung admitted.
Hung, 39, is among the rising social media influencers in Taipei offering stock tips. Using the handle Banini, she has garnered nearly half a million followers.
Previously averse to debt for enhanced returns, she eventually succumbed to the pressure after observing the market’s relentless ascent and friends enjoying substantial gains. In May, she borrowed NT$5 million ($158,302) to “take advantage of the opportunity” rather than miss out.
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Ada Hung. Image: Lam Yik Fei/Bloomberg
Rising Demand
The surge in investor demand for loans has prompted Taiwanese brokerages to aggressively borrow to secure working capital. They’ve issued nearly $1.2 billion in bonds this year, over seven times the total raised in 2025, according to Bloomberg data.
Some have sought alternative funding sources, navigating the syndicated loan market, where activity has surged to unprecedented levels this year as reported by Bloomberg data.
As the stock market continues its ascent, initial signs of trouble are beginning to emerge. For instance, defaults by investors related to stock trades have more than doubled in June, exceeding NT$2 billion, the highest monthly total recorded since 2019.
According to Wu, the economics professor, it is clear that the government must act decisively to mitigate the frenzy and prevent a future crash. “The Taiwanese government needs to step in to cool down the market,” he argues.
Stress Testing
Contacted by Bloomberg News, a unit of the Financial Supervisory Commission, which oversees brokerages, indicated that it is closely monitoring market risks, asserting that leverage in the industry remains manageable for now.
The Securities and Futures Bureau revealed that none of the 34 active brokerages utilizing various forms of leverage financing had breached regulatory limits as of May.
Additionally, the bureau reported that defaults in the stock market account for less than 0.002% of all transactions.
“We will continue to oversee the operational status and risk management of securities firms,” stated the regulator, noting that some firms have proactively responded by reducing leverage ratios, pausing online loan applications, and adjusting interest rates.
A bookstore featuring finance books on display in Taipei. Image: Lam Yik Fei/Bloomberg
Insiders have noted a rise in margin-loan rates by at least 0.2 percentage points, a significant increase given the central bank’s current benchmark rate is just 2%.
For unrestricted loans, allowing investors to borrow cash against their stocks and exchange-traded funds, increases have reportedly reached as high as one percentage point.
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Some firms have been advising their most aggressive clients to mitigate their risks. Others are stress-testing their loan portfolios against potential market declines of 20% or 30%.
In response, several companies have confirmed their commitment to maintaining financial stability. KGI Securities, the second-largest brokerage in Taiwan, mentioned its regular monitoring of leverage financing activities and its adjustments of the leverage ratios on specific stocks before raising them again this month.
Read: Big tech’s costly AI race is leading to hundreds of billions in debt deals
Fubon Securities, Taiwan’s third-largest brokerage, indicated it has revised specific lending rates and adjusted margin requirements for lower-rated, less liquid, and more volatile securities while leaving financing terms for others unchanged.
SinoPac Securities, the fourth-largest, reported that it evaluates its overall funding situation daily to manage lending limits and make necessary adjustments. Cathay Securities, the fifth-largest, has imposed restrictions on unrestricted loans related to specific high-risk stocks.
Yuanta Securities, Taiwan’s largest brokerage, declined to comment on the situation.
“If AI momentum slows, the repercussions will reach beyond the stock market,” warned Alicia Garcia Herrero, chief economist for Asia Pacific at Natixis SA. “It would likely exert pressure on brokerages, diminish household spending, and impact export growth.”
Analysts expect further stock gains in Taiwan in the coming months. Image: Lam Yik Fei/Bloomberg
Goldman’s Buy Rating
At this moment, these concerns feel far-off to most stakeholders. The majority of analysts within banks and brokerages predict further stock growth in the upcoming months, including Goldman Sachs, which has recently issued a buy rating for the market.
That evening at Pin Xian, everyone nodded in agreement.
After Cheng shared his ambitious forecasts for a broad market rally, his friend Albert Chen, a 25-year-old law student, chimed in, praising the advantages of a market heavily influenced by tech companies.
These firms generate roughly 20% of the island’s economic output and account for 80% of the benchmark stock index.
Even a month-long dip left Chen unfazed. He believes the fundamentals remain too strong to merit concern. “Taiwan,” he declared, “is fantastic.”
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