Taiwan’s AI stock boom is making early-stage startups a harder sell

Taiwan's stock market has surged this year as investors chase the country's broad AI supply chain. /Getty Images Taiwan's stock market has surged as investors pile into companies powering the global AI buildout. The rally is giving local investors a liquid alternative to early-stage startup bets. For early-stage founders, that can mean looking abroad for capital. Taiwan’s AI stock boom is creating more ways for investors to profit from its chip supply chain, making early-stage startups a tougher pitch. Taiwan’s benchmark Taiex index is up more than 50% this year, making it the world’s best-performing major index after pulling ahead of South Korea’s Kospi. The gains extend well beyond Taiwan Semiconductor Manufacturing Co., spanning chip design, advanced packaging, networking, and server companies. About 7% of Taiwan-listed stocks have doubled this year, compared with 3% in South Korea. That wider exposure has made Taiwan a preferred Asian AI trade. A September Bank of America survey found that 35% of fund managers expected Taiwan to benefit most from the next phase of the AI cycle, tying it with the US. Just 5% chose South Korea. For startups, the appeal of those public-market returns can reshape the funding calculation. For Anderson Chen, the founder and CEO of Operon Solutions, a Y Combinator-backed industrial AI startup, that calculus was part of what shaped how he raised money. Chen said he chose to raise Operon’s $700,000 pre-seed primarily from Silicon Valley investors, leaving room for Taiwanese friends and family to participate. “The market in semiconductors is just too good, and you can get 10X returns from the stock market,” Chen told Business Insider. In his view, even a successful startup IPO might generate only a two- or threefold return for investors. The hunt for a first check That creates a challenge for startups trying to build Taiwan’s next generation of winners. Caleb Chu, an early-stage investor and founder of Taiwan-based Nova Studio, which backs young founders, told Business Insider that the stock rally had drawn many Taiwanese investors toward listed shares and away from venture capital and startups. Findit, a government-commissioned platform that tracks Taiwan's startup ecosystem, found that seed and angel rounds made up 38.4% of investment deals by Taiwanese VC firms in 2021. By 2024, their share had fallen to 17.1%. By contrast, B- and C-round deals accounted for 39 deals, or 29.1% of the total, in 2024. Chu said Taiwanese investors had increasingly favored B- and C-round and pre-IPO companies, where the route to returns was clearer. Private-equity funds face a related, though not identical, pressure. A March report by KPMG Taiwan said TSMC’s share-price strength had created a “crowding-out effect” for private funds, as investors favored liquid public AI stocks over funds with longer lockups and less certain exits. US venture data shows a different, if still uneven, mix. PitchBook and the National Venture Capital Association said early-stage dealmaking was more favorable for AI startups than for non-AI peers in the first quarter of 2026. In a separate report, they found that 87.5% of US venture dollars invested in the first half went to rounds of $100 million or more. “When you look at the statistics around the world, the world is leaning toward early stage because investors realize it can generate much higher returns. Taiwan is the opposite,” Chu said. For founders, that can mean looking abroad for early backing. Operon's Chen said fundraising had become easier overall for Taiwanese deep-tech startups seeking overseas capital, helped by Taiwan’s technical talent and semiconductor expertise. His startup's $700,000 pre-seed round closed within three days. “It's gotten easier to fundraise in general, but maybe not necessarily in Taiwan,” he said. Read the original article on Business Insider

Read it at Business Insider ↗

← Front page