\n
![](\"https:\/\/fortune.com\/img-assets\/wp-content\/uploads\/2024\/07\/GettyImages-2161600593-e1721306571999.jpg?w=2048\")
<\/p>\n [ad_1]
\n<\/p>\n
Taiwan needs to pay more protection money to the United States if it wants to prevent China from invading, Donald Trump said in comments that pose serious implications for leading artificial intelligence companies.<\/p>\n
The island nation, which China views as its sovereign territory, is the number one manufacturing hub for cutting-edge semiconductors like the Nvidia<\/a> H100 graphic processors that powers generative\u00a0AI data centers<\/a>\u00a0used by the likes of Microsoft<\/a>, Google<\/a>, Amazon<\/a> as well as Elon Musk\u2019s Tesla<\/a> and his\u00a0latest startup<\/a>\u00a0xAI.\u00a0<\/p>\n But Beijing\u2019s threat of invasion or naval blockade has investors worried. Last year, Warren Buffett sold his\u00a0entire stake<\/a>\u00a0in the country\u2019s leading chipmaker, Taiwan Semiconductor Manufacturing<\/a> Company (TSMC), to avoid any unnecessary risks.<\/p>\n In an\u00a0interview<\/a>\u00a0with\u00a0Bloomberg Businessweek, <\/em>Trump only heightened those risks by likening America to an insurance provider for the country: \u201cI think Taiwan should pay us for defense.\u201d<\/p>\n Making such a statement publicly tells rivals like China that the country\u2019s political winds are shifting, inviting them to exploit the weakness.<\/p>\n Together with speculation the Biden administration, trailing Trump in key swing state polls, is\u00a0weighing<\/a>\u00a0whether to tighten\u00a0export controls<\/a>\u00a0of\u00a0advanced semiconductor<\/a>\u00a0equipment further<\/span>, chip stocks took a beating during Wednesday\u2019s trading. <\/p>\n The Philidelphia semiconductor index fell 7% in the session.<\/p>\n Taiwan\u2019s security is so important to Nvidia and, by extension, the Big Tech companies it supplies because <\/span>Nvidia\u2014unlike Intel\u2014never sought to fabricate its own chips.\u00a0<\/p>\n Instead, Nvidia founder Jensen Huang\u2014a Taiwan native\u2014outsourced production to so-called foundries like TSMC.<\/p>\n Founded in 1987 by former Texas Instruments<\/a> executive Morris Chang, TSMC grew into the largest foundry in the world. <\/p>\n It is the sole provider of Nvidia\u2019s AI training chips and cannot be replaced since it possesses the most advanced form of miniaturization on the market.<\/p>\n As a result, even though TSMC does not design AI chips, its unique stranglehold on supply has seen it\u00a0ride the same AI wave<\/a>\u00a0as Nvidia. <\/p>\n Earlier this month, it became the first East Asian company to break through the $1 trillion market cap threshold. <\/p>\n On Thursday, the company\u00a0hiked its revenue forecast<\/a> after robust quarterly results.\u00a0\u00a0<\/p>\n The island\u2019s semiconductor in<\/span>dustry is so vital to U.S. interests that researchers with the Army War College have explored scorched-earth scenarios advocating the\u00a0demolition of its chip fabs\u00a0in the\u00a0event of an invasion\u00a0to prevent them from falling into the hands of the Chinese.\u00a0<\/p>\n In his interview with Bloomberg, however, the publication reported that Trump was, at best, lukewarm about standing up to Chinese aggression, in part because he resented Taiwan chipmakers that outcompeted their U.S. peers.\u00a0<\/p>\n \u201cWhy are we doing this?\u201d the real estate magnate asked at his Florida home in Mar-a-Lago. \u201cHow stupid are we? They took all of our chip business.\u201d<\/p>\n His implicit threat that the security umbrella could be withdrawn at any time under a new Trump administration is reminiscent of a stance taken during the campaign by his then-opponent,\u00a0Vivek Ramaswamy<\/a>, who promised to defend Taiwan in the event of an invasion only until the U.S. could make the chips itself.<\/p>\n In private, this could send a powerful message to lawmakers in Taipei that they need to further\u00a0open <\/a>their market<\/a>\u00a0to key U.S. imports like pork, which was until recently banned over America\u2019s continued use of a controversial additive called Ractopamine. <\/span><\/p>\n When asked on Wednesday about Trump\u2019s demand for the country to pay up, Taiwan\u2019s head of government sought to lower temperatures by saying it was stepping up to meet the growing military needs.<\/p>\n \u201cTaiwan has steadily strengthened its defense budget and adjusted the conscription serving period,\u201d premier Cho Jung-tai\u00a0told reporters<\/a>, adding the country is \u201cwilling to take on more responsibility\u201d on security issues.\u00a0<\/p>\n After heavy losses, shares in Nvidia and Tesla, as well as TSMC\u2019s U.S.-listed ADR shares, are expected to open higher on Thursday when trading begins.\u00a0<\/p>\n But this issue may not go away as long as Trump maintains the U.S. alliance with Taiwan is transactional only.<\/p>\n<\/div>\n CEO Daily provides key context for the news leaders need to know from across the world of business. Every weekday morning, more than 125,000 readers trust CEO Daily for insights about\u2013and from inside\u2013the C-suite. Subscribe Now<\/a>.<\/div>\nTaiwan\u2019s TSMC irreplaceable for Nvidia<\/h2>\n
Resentment at Taiwanese industry\u2019s success <\/h2>\n
Taipei downplays Trump comments<\/h2>\n
Recommended Newsletter:<\/strong><\/p>\n