Taiwan Semiconductor Too Big For The Index, Regulator Considers Lifting Weight Cap

by Anusuya Lahiri Benzinga Editor

Taiwan’s Financial Supervisory Commission is exploring the removal of the 30% cap for constituent member stocks in the market capitalization of local index ETFs.

The Taiwanese regulator may approve appropriate amendments in the first half of this year, Bloomberg reported on Friday.

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Taiwan Semiconductor Manufacturing Co’s TSM member weighting in local equity benchmark Taiex climbed to 37%, making adjustments in ETF products tracking the index difficult.

The chipmaker stock surged 140% since the global artificial intelligence investing frenzy in late 2022. Taiwan Semiconductor stock surged 60% in the last 12 months. It is the key supplier of AI chips for Nvidia Corp NVDA GPUs and Apple Inc AAPL smartphones.

The AI frenzy is in no mood to slow down. Reportedly, Microsoft Corp MSFT committed $80 billion in AI infrastructure spending for 2025, and Meta Platforms Inc META earmarked $60-65 billion.

The Taiwanese contract chipmaker’s rumored Intel Corp INTC deal could expand its market share to 75% (up from 64.9% in the third quarter of 2024) and could further increase the market cap of the stock.

Taiwan looks to boost U.S. trade and defense ties, addressing President Donald Trump’s chip concerns as the chipmaker invests $65 billion in Arizona fabs.

Trump had verbally attacked Taiwan since his presidential campaign days for allegedly undermining U.S. manufacturing of semiconductor chips, including the lack of a formal defense treaty between the Chinese-claimed Taiwan as its most significant international backer and arms supplier.

Trump also criticized Taiwan for its trade surplus with the U.S.. He threatened to impose 100% tariffs on Taiwan-made chips. Reportedly, Trump plans to scrap the US CHIPS and Science Act, which Taiwan Semiconductor is a significant beneficiary of.

Meanwhile, Taiwan Semiconductor ramped up U.S. expansion, spending $17.14 billion on advanced chips and packaging as Taiwan seeks a global AI chip alliance.

Investors can gain exposure to Taiwan Semiconductor through VanEck Semiconductor ETF SMH and iShares Semiconductor ETF SOXX.

Price Action: TSM stock traded higher by 0.75% to $201.60 premarket at the last check on Friday.

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