Taiwan Central Bank Flags AI Bubble Risks Amid Tech Investment Boom

Taiwan's central bank has cautioned that the rapid rise of artificial intelligence (AI) could create financial risks if investment in the sector continues to outpace market fundamentals.

While AI is driving economic growth and strengthening Taiwan's technology industry, policymakers say excessive optimism and heavy borrowing could eventually lead to an AI bubble.

Speaking before lawmakers, Central Bank Governor Yang Chin-long said AI investments are supported by real technological progress and strong global demand.

However, he warned that history has shown how fast-growing industries can attract speculative investments, making markets more vulnerable if investor sentiment changes.

• Taiwan central bank warns of AI bubble risks amid tech investment boom
• Taiwan flags financial risks as AI investment and chip demand surge
• AI growth boosts Taiwan economy while raising market bubble concerns

AI Growth Brings Opportunity and Caution

Taiwan has become a key player in the global AI supply chain, largely because of its world-leading semiconductor industry. Growing demand for advanced AI chips used in artificial intelligence applications has boosted exports, lifted technology stocks, and strengthened the country's economic outlook.

Governor Yang said AI is creating genuine business opportunities and supporting long-term growth. At the same time, he cautioned that companies and investors may become overly optimistic during periods of rapid technological change, leading to increased corporate borrowing and higher financial risks.

The central bank recently decided to keep interest rates unchanged, noting that while the technology sector continues to perform well, other parts of Taiwan's economy remain under pressure. Officials believe maintaining the current policy will help support broader growth without adding unnecessary strain on industries that are still recovering.

Yang said the central bank will continue monitoring financial markets, technology investments, and market valuations to ensure that the rapid expansion of AI does not create risks for the wider economy or threaten financial stability.

Global Regulators Keep a Close Watch

Taiwan is not alone in raising concerns about the pace of AI investment. Financial regulators and central banks around the world have increasingly warned that soaring market valuations of AI-related companies could become difficult to sustain if business performance fails to match investor expectations.

Although artificial intelligence is expected to improve productivity and create new business opportunities across industries, regulators say strong market enthusiasm can sometimes encourage excessive risk-taking. High company valuations, concentrated investments, and rising debt levels could make financial markets more volatile if economic conditions weaken.

Taiwan's position as a major supplier of advanced AI chips places it at the centre of the global AI market. As technology companies continue investing heavily in AI infrastructure, demand for Taiwanese chipmakers remains strong, supporting exports and reinforcing the country's leadership in the AI supply chain.

Industry analysts believe AI investment is still backed by solid demand, particularly in cloud computing, data centres, and enterprise software. Even so, they say long-term success will depend on companies turning those investments into sustainable revenue and profits rather than relying only on future growth expectations.

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The central bank's warning highlights the need to balance innovation with financial stability. While Taiwan remains optimistic about the opportunities created by artificial intelligence, policymakers say careful oversight will be essential to prevent excessive speculation from undermining the sector's long-term growth.