Taiwan just did what Zelensky couldn't: paid protection

Welcome to AI Collision 💥,

In today’s collision between AI and our world:

TSMC succeeds where Zelensky couldn’t
Trump tariffs aren’t helping either
Crisis mode or opportunity still?

If that’s enough to get the $165 billion investing, read on…

AI Collision 💥

For several years now, it’s been widely recognised by senior US military officials that China has a “deadline” of 2027 to resolve the “Taiwan issue”.

According to a post from The Lowy Institute just a couple of weeks ago,

While the 2027 drumbeat by senior US officials has faded, revelations in recent months of surprising and troubling advances in the modernisation of the People’s Liberation Army (PLA) since 2021 compel an assessment of expectations for the next two years before the once fateful “window” opens.

If that rings true, and China is still seriously looking to use force if necessary to invade Taiwan, then clearly Taiwan is going to need all the help it can get to ensure that doesn’t happen.

In other words, Taiwan needs to get help from the US.

The problem with that, however, is that the US is now appearing to have a distinct change of tact when it comes to its involvement in foreign wars.

The US is happy to help out, but there’s got to be something in it for them. It has to make good business sense, otherwise it’s wasting its time, resources and money – things the US is not in ample supply of as it used to be.

That’s why the US wants to strike a deal with Ukraine for rare earths. It gives the US a reason to protect Ukraine, and it gets something it needs that China typically controls the supply of. But Ukrainian President Zelensky didn’t want a bar of it. He may come around, but he’s got to realise: you want protection, you’ve got to pay.

The good news for Taiwan is, it’s got an ace up its sleeve. Taiwan realises the pay-to-protect mentality the US now has. Granted, the Taiwan ace is its only one, but it’s a very powerful ace.

In fact, its ace even has a name – Taiwan Semiconductor Manufacturing Company (TSM).

It’s through TSMC that Taiwan has now effectively paid for its protection against the always looming threat of a Chinese invasion.

The US has a vested interest now at a $165 billion scale.

Let’s look at what TSMC announced (alongside President Trump merely days after the shambles of a press conference held with President Zelensky):

TSMC (TWSE: 2330, NYSE: TSM) today announced its intention to expand its investment in advanced semiconductor manufacturing in the United States by an additional $100 billion. Building on the company’s ongoing $65 billion investment in its advanced semiconductor manufacturing operations in Phoenix, Arizona, TSMC’s total investment in the U.S. is expected to reach US$165 billion. The expansion includes plans for three new fabrication plants, two advanced packaging facilities and a major R&D team center, solidifying this project as the largest single foreign direct investment in U.S. history.

That last line is the kicker.

Sure, this investment is directly into the US. And it’s partially in response to looming tariffs on chip imports into the US. By committing and building these facilities, advanced chips for the likes of Nvidia and Apple will be made in the US (albeit by a Taiwanese company).

Also, if China decides to invade Taiwan, that also becomes a destabilising factor for TSMC and, by association (or by association to a considerably larger value), the US.

What’s evident is that by separating the geopolitics out for a moment, TSMC is ready, willing and able to expand operations. It could very well have built this in Taiwan. It could have built new facilities in Europe. But it’s the US it’s a) most threatened by with Trump tariffs, b) most in need of in terms of the US market to serve its customers, and then back to c) desperate for and its vested interest to help sure up a slither of safety in Taiwan.

It would also make sense that this got a big ol’ stamp of approval from the Taiwanese government before it even got near the White House.

But as for the stock, well. Like everything else semiconductor related, AI related and growth related, it was another day in the red thanks to Trump. He decided that Canada and Mexico weren’t doing enough so the 25% tariffs were going to start right away.

For good measure, he announced further tariffs on China too. And for more good measure, considerations on tighter controls on Nvidia chip exports as a recent report showed that Nvidia chips are still breaking through the export restrictions and making their way to China.

After finding itself briefly ticking over $1 trillion in market cap, TSMC is down into the $800-billions and down some 13% year to date.

My take is that in the short term, there could be more of this. It certainly feels like Trump is front loading the chaos of tariffs and tough global geopolitical negotiating. But he certainly doesn’t want to leave his legacy as the president who drove the country into a depression.

He has the tools to avoid that (probably) and in many aspects it’s working. After all, as we say, TSMC isn’t investing $165 billion into the UK or Europe now is it?

Sure, it looks like paid protection, but I don’t think the US cares. In the long term, it does sure up the TSMC supply chain through to the giants of “Big Tech” who are all in the US too.

For me, I still like the way TSMC looks long term. Yes, havoc may still ensue, but it’s in such a commanding position that it’s hard to look at moments like this other than another opportunity.

Is this the Single Best AI Strategy for 2025?

A new technology is about to change the global balance of power – for the next half-century. And it’s happening 35 minutes from Oxford. This is one of the biggest financial opportunities I’ve ever seen.

Here’s the full story…

Capital at risk

Boomers & Busters 💰

AI and AI-related stocks moving and shaking up the markets this week. (All performance data below over the rolling week).

man in black suit jacket and black pants figurine

Boom 📈

Gorilla Technology (NASDAQ:GRRR) up 76%
Cyngn (NASDAQ:CYN) up 10%
Veritone (NASDAQ:VERI) up 0%

Bust 📉

Dell Technologies (NYSE:DELL) down 15%
Arm Holdings (NASDAQ:ARM) down 10%
Tesla (NASDAQ:TSLA) down 10%

From the hive mind 🧠

Next year. That’s the time left for humans to be the most intelligent species on earth. But would you call AI a species? Probably not. So we will remain the most intelligent species, just not the most intelligent intelligence on earth.
$61.5 billion. That’s the latest valuation for Anthropic, the heavily-Amazon-backed AI company taking on OpenAI, xAI, DeepSeek, etc. It just bagged another $3.5 billion in funding, which is more evidence the market might be looking shaky but the capital is still flowing for AI.
The rise was short lived. And Tesla continued to head south. But at least Morgan Stanley gets it. Tesla isn’t so much a car company anymore as it becomes an AI and robotics company.