Taiwan’s AI rally is turning startup founders toward foreign capital

By Nathan Brooks

Business Insider Africa reported that Taiwan’s benchmark Taiex index is up more than 50% this year, making it the world’s best-performing major index after pulling ahead of South Korea’s Kospi. The rally is drawing investors into companies powering the global AI buildout, according to the outlet.

The gains extend well beyond Taiwan Semiconductor Manufacturing Co., spanning chip design, advanced packaging, networking and server companies, Business Insider Africa said. About 7% of Taiwan-listed stocks have doubled this year, compared with 3% in South Korea, according to the outlet.

That wider exposure has made Taiwan a preferred Asian AI trade, according to Business Insider Africa. In a September Bank of America survey, 35% of fund managers expected Taiwan to benefit most from the next phase of the AI cycle, tying it with the US; just 5% chose South Korea.

What does this change for startup founders?

The rally gives local investors a liquid alternative to early-stage startup bets, Business Insider Africa said. For founders, that creates a challenge for startups trying to build Taiwan’s next generation of winners. It can reshape the funding calculus and make overseas capital more attractive.

Anderson Chen, founder and CEO of Y Combinator-backed industrial AI startup Operon Solutions, said that calculation shaped how he raised money. He chose to raise Operon’s $700,000 pre-seed primarily from Silicon Valley investors, leaving room for Taiwanese friends and family to participate.

Chen told Business Insider: “The market in semiconductors is just too good, and you can get 10X returns from the stock market,” he said. In his view, even a successful startup IPO might generate only a two- or threefold return for investors.

Caleb Chu, an early-stage investor and founder of Taiwan-based Nova Studio, which backs young founders, told Business Insider the rally drew many Taiwanese investors toward listed shares. He said they moved away from venture capital and startups, where the route to returns remained less clear.

Findit, a government-commissioned platform that tracks Taiwan’s startup ecosystem, found that seed and angel rounds made up 38.4% of investment deals by Taiwanese VC firms in 2021. By 2024, their share had fallen to 17.1%.

In 2024, B- and C-round deals accounted for 39 deals, or 29.1% of the total, according to Findit. Chu said Taiwanese investors increasingly favored B- and C-round and pre-IPO companies because the route to returns was clearer.

Private funds face a related squeeze

A March report by KPMG Taiwan found that TSMC’s share-price strength had created a crowding-out effect for private funds. According to KPMG Taiwan, investors favored liquid public AI stocks over funds with longer lockups and less certain exits, a related but distinct pressure from the shift affecting startups.

U.S. venture data showed a different, if still uneven, mix. PitchBook and the National Venture Capital Association said early-stage dealmaking was more favorable for AI startups than for non-AI peers in the first quarter of 2026.

In a separate report, PitchBook and the National Venture Capital Association found that 87.5% of U.S. venture dollars invested in the first half went to rounds of $100 million or more. The figures point to a U.S. market that still concentrates capital in large rounds while giving some AI founders better access to early-stage capital.

Chu put the contrast bluntly: “When you look at the statistics around the world, the world is leaning toward early stage because investors realize it can generate much higher returns. Taiwan is the opposite,” he said. That matters because Findit’s figures show seed and angel deal share falling as public-equity returns strengthened.

The overseas-capital alternative

Chen said fundraising had become easier overall for Taiwanese deep-tech startups seeking overseas capital. He attributed part of that advantage to Taiwan’s technical talent and semiconductor expertise.

Operon’s $700,000 pre-seed round closed within three days, according to Chen. His assessment was blunt: “It’s gotten easier to fundraise in general, but maybe not necessarily in Taiwan,” he said.

That leaves Taiwan’s founders with a concrete trade-off: liquid public AI exposure at home, early backing increasingly abroad. For the next generation of deep-tech companies, fundraising may be easier across borders than inside Taiwan, according to Chen’s experience with Operon’s three-day round.