Taiwan's economy is booming thanks to the AI craze

• Taiwan's economy is booming.
• Its GDP rose by a better-than-expected 6.5% in the first quarter, data published on Tuesday showed.
• Exports of AI-related tech such as semiconductors were one of the key growth drivers.

The ChatGPT-fueled artificial intelligence boom has helped Taiwan's economy expand more than expected.

Gross Domestic Product (GDP) rose by 6.5% in the first three months of the year compared with the same quarter in 2023, the statistics bureau said on Tuesday.

That's the fastest expansion rate in nearly three years and ahead of the 6% figure economists polled by Bloomberg were expecting.

The AI craze has been one of the key drivers of growth for Taiwan over the past year.

Its overall exports jumped just under 19% in March, with sales of AI-related hardware soaring more than 400%.

"The pace of growth may not always show an out-sized surprise, like March's, but we believe Taiwan's export demand will continue to get a meaningful boost from both AI-related investments and ongoing strength in [the] US economy," Bansi Madhavani, an economist at Australia's ANZ Banking Group, previously told Bloomberg.

Taiwan is one of the world's biggest manufacturers of the microchips needed to power large language models (LLMs) like ChatGPT.

According to data from Citi, Taiwan's TSMC produces 90% of the world's most advanced processor chips. The AI craze of the past year and a half has led to skyrocketing demand for these types of semiconductors and helped make TSMC the world's ninth most-valuable company worth almost $720 billion.

Strong consumer spending also boosted Taiwan's growth in the first three months of the year, the statistics bureau said, with tourism, food and beverages, and the stock market all enjoying bounce-back quarters.

Economists have warned that growth could slow over the rest of 2024, with Taipei estimating that GDP will be up 3.4% by year-end. That chimes with sluggish forecasts from TSMC and Intel, with both warning in recent weeks of a potential slowdown in semiconductor demand.

The Taiwan Stock Exchange closed 0.5% lower on Tuesday as traders fretted that the AI rally might have peaked, while the New Taiwan dollar fell 0.4% against the US greenback, per data from Refinitiv.