JAIPUR: Taiwan's stock market has picked up a pace in 2026 that has taken everyone by surprise. Rising global demand for AI hardware and strength in the semiconductor sector have fueled this surge. But behind all the shine lies a worrying trend — ordinary Taiwanese investors have increasingly started borrowing from banks to buy shares.
What the Numbers Say
In the first half of the year, Taiwan's benchmark index, the TAIEX, jumped nearly 59% — making it one of the strongest-performing markets in the world during that period. Behind this rally was the global AI boom, which pushed demand for advanced chips and related hardware to new heights.
On May 25, 2026, the combined market value of all listed companies in Taiwan reached about $4.95 trillion — slightly ahead of India's roughly $4.92 trillion market cap at the time. Such a close comparison between the two countries is rare, and it shows how AI-driven rallies can reshape the competitive dynamics among emerging markets.
At the center of this whole story is Taiwan Semiconductor Manufacturing Co (TSMC). The chipmaker's market value rose by around 50%, and it was during this surge that Taiwan briefly overtook India in total market value.
When Ordinary People Started Borrowing to Enter the Market
The market's powerful rally encouraged retail investors to take bigger bets on tech stocks. For some, the confidence grew so much that they began investing with borrowed money.
Reports mention one such case — a 34-year-old real-estate worker took out three separate bank loans totaling around NT$5 million and put it all into tech stocks, with about half going into TSMC alone. By June, his portfolio value had risen roughly 70%, reaching close to NT$20 million.
(This example is drawn from media reports as an illustrative case — the individual's identity and figures could not be independently verified, so it should be seen as representative of a broader trend rather than a confirmed fact.)
This example shows just how attractive borrowed money can look during a strong market rally. When share prices rise quickly, borrowing allows investors to build positions far larger than what their own savings would allow. For those on the winning side, the returns look spectacular — but when the market turns, losses pile up just as fast.
Norman Yin, a professor at National Chengchi University, points to growing enthusiasm among younger Taiwanese investors. According to him, banks are sitting on large deposits while the property market has slowed down — leaving financial institutions with more room to lend. That combination is encouraging some investors to borrow and put the money into stocks.
Margin Trading Up 20%
This trend of investing with borrowed money is also visible in the market data. According to Taiwan Stock Exchange figures, margin trading rose by around 20% in the first half of 2026.
Margin trading lets investors borrow money through brokers or financial institutions to buy shares. The strategy amplifies returns when stocks rise, but it magnifies losses just as much when prices fall. This makes the rise in margin activity especially significant at a time when the market has already seen such a substantial rally.
Taiwan's Financial Supervisory Commission says credit risk remains under control for now. Even so, the Taiwan Stock Exchange has started using social media videos to warn younger investors about the dangers of loan defaults and leveraged investing — a sign that regulators are keeping a close eye on this trend.
A 16% Correction Reveals the Real Picture
The market's recent correction served as a clear reminder of how quickly things can change.
The TAIEX hit a record high on June 22, 2026. But by July 30, the index had fallen roughly 16% from that peak.
For investors using their own money, this drop was difficult but manageable — especially for those with a longer time horizon. For those who had borrowed to invest, though, the impact was far greater. Loan repayments and interest keep running even as share prices fall, meaning a sharp decline creates extra financial pressure specifically for leveraged investors.
This is the core risk facing Taiwan's retail investors — a strategy that delivers impressive gains during a rally can quickly turn costly once sentiment shifts. (It remains unclear exactly how much this correction affected the portfolios of those who invested with borrowed money — that's something worth watching for in future reports.)
Comparison With South Korea
Taiwan isn't the only Asian market where retail investors have become a major force. In South Korea, retail investors are affectionately called "ants," and they play a big role in the country's stock market. South Korea has around 15 million retail investors, who account for roughly 60-70% of annual trading volume.
Korean investors have also become significant players in global markets — in 2025, they made about $73.6 billion in net purchases of US stocks, making South Korea the third-largest buyer of US equities.
Taiwan's trend looks a little different. Rather than sending money mostly into overseas markets, most Taiwanese investors are putting their money into their own domestic AI and semiconductor ecosystem — giving them direct exposure to companies benefiting from the global AI investment cycle.
Is This Rally Sustainable?
The fundamental story behind Taiwan's rally still looks strong. Global demand for AI infrastructure, advanced semiconductors, and related hardware has created major opportunities for Taiwan's tech industry, with TSMC remaining at the center of that entire ecosystem.
But strong fundamentals don't mean stock prices will keep rising without interruption. The 59% first-half rally followed by a 16% correction from the June record high shows exactly that — the rally is as powerful as it is volatile.
The growing use of leverage adds another layer of risk. If investors keep increasing their borrowed exposure even at elevated prices, any future downturn could hit household finances much harder. That's why the line between investing with savings and investing with borrowed money matters more than ever right now.
A section of market watchers believes that leverage-driven rallies have rarely stood the test of time historically — because as soon as sentiment turns, positions built on debt come under pressure first. This view adds some balance to the debate, showing that the rally story alone doesn't capture the full picture.
Analysis: The Other Side of the Coin
Taiwan's stock market has emerged as one of the clearest beneficiaries of the global AI boom in 2026. The TAIEX's 59% first-half rally, strong semiconductor demand, and TSMC's powerful performance have generated substantial gains and drawn in a new wave of retail investors.
But the rising use of leverage deserves just as much attention. The 20% jump in margin trading shows that borrowed money is playing an increasingly large role in market participation. The illustrative case mentioned earlier also shows how the rally has pushed some investors into positions far bigger than their own savings would normally support.
Regulators currently consider credit risk to be under control, but the warnings from the Taiwan Stock Exchange suggest authorities are taking this trend seriously. The recent 16% correction is perhaps the clearest lesson of all — a strong AI story can support a market, but it cannot eliminate market risk.
Going forward, semiconductor demand, corporate earnings, TSMC's performance, and retail leverage will remain key factors to watch. If the AI cycle stays strong, the market is likely to keep attracting investors. But if sentiment shifts suddenly, those who entered the rally on borrowed money could face far bigger losses than investors relying purely on their own savings.
Disclaimer: This article is intended for informational purposes only and should not be considered investment advice. Investments in securities are subject to market risks. Investors should conduct their own research or consult a qualified financial advisor before making any investment decisions.
