How do we know when irrational exuberance has unduly escalated asset values? - Alan Greenspan
How do we know when irrational exuberance has unduly escalated asset values?
Taiwan Semiconductor Manufacturing Co. (TSMC) dominates the Taiwanese stock market, accounting for over half of the MSCI Taiwan Index – a level of concentration rarely seen in modern finance. TSMC’s rise shows how markets reward scale, channeling capital into the firms that anchor global technology. Innovation and scale have merged so completely that one company effectively is the market.
TSMC’s supremacy has become central to Taiwan’s economic identity. The company now represents the majority of Taiwan’s equity market and about 150% of its gross domestic product (GDP), ranking among the most economically significant corporations in modern history. For perspective, at the height of the dot-com boom in 2000, Nokia accounted for about 70% of Finland’s market capitalization and 230% of Finnish GDP. Both companies came to symbolize their respective economies’ fortunes and technological pride.
TSMC sits at the foundation of global technology, producing the chips that drive AI models, data centers and advanced electronics. Rather than a corporate champion, TSMC now operates like a sovereign utility of the digital economy – indispensable, hard to replace and exposed to the same geopolitical risks that surround Taiwan. Its rise captures a broader shift in markets, where technological bottlenecks – not broad sectors – now define the balance of global power.
At its peak, Nokia defined Finland’s economy before its dominance unwound within a decade. As former CEO Stephen Elop later reflected, “We did everything right, and we still lost.” History suggests such dominance rarely lasts forever – and the AI boom has only amplified that dynamic.
As we wrote in Paradigm Shift or Bubble? Nvidia and Crypto at $8 Trillion, Nvidia and crypto define the speculative side of AI. TSMC is the real-world counterpart – the infrastructure on which that momentum depends. What began as hype has become structural: a market where hardware makers and chip designers now capture an outsized share of global capital and influence.
Investing in smaller markets comes with concentration risk, but Taiwan represents its most extreme form. Owning “Taiwan” increasingly means owning one semiconductor company, turning regional diversification into a single-stock bet on the durability of AI demand and Taiwan’s political stability. For many global portfolios, that exposure is now unavoidable.
TSMC’s dominance captures the defining tension of today’s markets: innovation as both strength and vulnerability. The same forces that made it indispensable have concentrated capital and geopolitical weight in a single firm. Global markets are being reshaped not by sectors but by individual companies whose scale fuses corporate power with economic significance.
When a company defines an index, its success stops being just a story of growth – it becomes a test of how much concentration global markets can sustain.
Between the Lines is a weekly blog by DoubleLine Portfolio Managers Sam Garza, Joseph Mezyk and Quant Analysts Fei He, CFA and Sunyu Wang that breaks down topical macro and market issues. For questions or suggestions please e-mail us at betweenthelines@doubleline.com. The views and opinions expressed herein are those of the authors and do not necessarily reflect the views of DoubleLine Capital LP, its affiliates or employees.
