Summary of this article
Taiwan overtook India as the fifth-largest stock market, driven by TSMC’s AI-led rally
TSMC constitutes over 42 per cent weight in Taiwan’s benchmark index
India’s markets have lagged amid FPI outflows, high valuations and slowing earnings growth
Taiwan has overtaken India to become the world’s fifth-largest stock market, and a major reason behind this rise is largely about one company, the chipmaking giant Taiwan Semiconductor Manufacturing Company (TSMC).
According to Bloomberg, Taiwan’s total stock market capitalisation rose to nearly $4.95 trillion as of May 26, surpassing India’s market capitalisation of around $4.92 trillion. Taiwan now ranks behind only the US, mainland China, Japan and Hong Kong in global equity market rankings.
One Stock Behind The AI Boom
The rally has been powered almost entirely by TSMC, whose shares have surged about 45 per cent so far in 2026 and about 130 per cent over the last year amid the global artificial intelligence (AI) boom.
Taiwan’s explosive rise in market capitalisation shows that global investors are heavily betting on AI-related companies, especially chipmakers and semiconductor firms. As home to some of the world’s most advanced chip manufacturers, Taiwan has become one of the biggest winners of the multi-year mega AI boom.
Another factor supporting Taiwan’s rally is a recent regulatory change. Taiwan’s financial regulator, the Financial Supervisory Commission (FSC), increased the limit for domestic funds to invest in a single stock from 10 per cent to 25 per cent of net assets, provided the company accounts for over 10 per cent of the Taiwan Stock Exchange weighting. At present, TSMC is the only company eligible under this rule. According to JPMorgan estimates, the move could attract more than $6 billion in fresh inflows into Taiwanese equities.
The company alone now accounts for over 42 per cent of Taiwan’s benchmark index TAIEX. Earlier this week, the index hit a fresh record high, crossing the 44,000 mark. The index has rallied nearly 50 per cent year-to-date (YTD) and over 100 per cent over the last year.
The MSCI Taiwan index, which represents about 85 per cent of the free float-adjusted market capitalisation in Taiwan, has rallied 56 per cent YTD and 112 per cent over the year. TSMC constitutes about 57 per cent of the weight in this index.
Other stocks that also continued to rise with Taiwan include Delta Electronics, Mediatek, and Hon Hai Precision, which have rallied around 535 per cent, 230 per cent, and 70 per cent, respectively. However, the collective weight of these companies in the MSCI Taiwan Index is just 12 per cent.
A Tough Year For India
India, meanwhile, has had a tough year in the equity markets. The benchmark Nifty 50 index has fallen nearly 8 per cent so far in 2026 and around 3.75 per cent over the past year. The index is now on track to post its first annual decline in more than a decade. The last time the Nifty 50 delivered negative yearly returns was in 2015, when it fell about 3 per cent.
Foreign portfolio investors (FPIs) have reduced their exposure in Indian equities quite heavily amid elevated valuations, depreciating rupee, and slowing corporate earnings growth. The ongoing surge in energy prices following geopolitical tensions between the United States and Iran has also weighed on investor sentiment.
As per National Securities Depository (NSDL) data, FPIs have sold nearly Rs 2.27 lakh crore worth of Indian equities so far in 2026, after pulling out Rs 1.66 lakh crore in 2025.
Despite losing its position in stock market rankings, India continues to remain far ahead of Taiwan in terms of economic size. According to estimates by the International Monetary Fund (IMF), India’s economy is valued at around $4.15 trillion, as against Taiwan’s $977 billion economy.
