Propelled by relentless expansion in AI demand, Taiwan’s economy and capital markets are delivering stellar performances, with local equities recently scaling fresh all-time highs. Hsien-Ming Lien, President of the Chung-Hua Institution for Economic Research (CIER), noted that robust demand in AI-related sectors is underpinning export and investment growth, with the current economic boom expected to persist through year-end. However, Lien cautioned that following rapid market rallies, investors should remain alert to potential volatility and the risk of a correction.
Buoyed by an optimistic outlook for the AI industry and steady inflows of foreign capital, the benchmark index has continued its ascent. President Lien pointed out that while the current rally has undeniably surpassed many expectations, it remains difficult to definitively determine whether the market is overheating. Nevertheless, given the inherently cyclical nature of financial markets, Lien warned that rapidly elevated valuations could trigger a steeper-than-expected correction, advising investors to tread carefully.
On the fundamentals front, the Directorate-General of Budget, Accounting and Statistics (DGBAS) reported a blistering Q1 economic growth rate of 14.55%, prompting an upward revision of its full-year GDP growth forecast to 9.64%. President Lien observed that the rapid proliferation of AI applications has ignited global technology demand. Entrenched as a linchpin in global semiconductor and information and communications technology (ICT) supply chains, Taiwan is leveraging this position as a critical engine for export and investment growth.
Wealth Effect Boosts Consumer Confidence; Caution Advised Amid Elevated Markets
With growth in AI hardware demand outpacing initial market estimates, institutions continue to upgrade Taiwan’s broader economic outlook. Concurrently, private consumption has maintained steady expansion, underscoring that a resilient domestic market is actively complementing the island’s stellar export performance.
The wealth effect generated by a surging stock market has also bolstered consumer confidence. Although asset appreciation largely represents paper gains, the perceived increase in household wealth is poised to further stimulate consumer spending, acting as a crucial pillar for domestic demand.
According to the latest data released by CIER, Taiwan’s manufacturing Purchasing Managers’ Index (PMI) climbed to 61.4 in May. This marks eight consecutive months of expansion and the highest reading in nearly five years. The Non-Manufacturing Index (NMI) also remained firmly in expansionary territory at 58.2.
Lien concluded that leading indicators confirm Taiwan’s economy is squarely in an expansionary phase, with AI-driven dividends in exports, investments, and industrial upgrades continuing to materialize. However, despite the strengthening economic fundamentals, Lien urged market participants to closely monitor shifts in the global macroeconomic landscape and potential volatility in financial markets, advising a prudent approach to long-term investment strategies.
Author: CIER Editorial Team Date: June 2, 2026