TSMC’s Meteoric 36% Surge in 2025 Forces Index Giants to Rebalance as Chip Titan Nears 12% Dominance
Semiconductor powerhouse TSMC just rewrote the rulebook—again. With a blistering 36% rally this year, the chipmaker's gravitational pull is warping major indexes as its weight flirts with 12%. Wall Street's algos never saw it coming.
The 'Taiwan Tremor' shaking global markets
Index fund managers are scrambling like ants under a magnifying glass. That 12% footprint? It's forcing brutal sell orders on other components just to maintain balance—because heaven forbid passive funds actually deviate from their precious benchmarks.
TSMC's secret sauce: Printing chips and sucking up capital
While meme-stock traders were busy chasing holograms in the metaverse, TSMC quietly vacuumed up 36% of investors' oxygen this year. The ultimate 'boring tech' play became the market's uncrowned sovereign—proving once again that real infrastructure beats flashy disruption.
Closing thought: When a single stock grows this dominant, it stops being an investment and starts being a systemic risk. But hey—at least the index-fund lemmings get front-row seats to the next liquidity crisis.
Rally pushes TSMC beyond fund limits
Right now, TSMC controls nearly 43% of the Taiex, Taiwan’s main stock index. It also makes up close to 12% of both the MSCI Emerging Markets Index and MSCI Asia Pacific Excluding Japan Index, which means any manager tracking those benchmarks is instantly at risk of breaching their caps.
European UCITS rules cap exposure to any one stock at 10%, and Taiwanese regulators enforce the same limit, though officials are reportedly discussing whether to relax those limits but nothing has been finalized yet.
On the flip side, passive funds (those that just mirror the index) have more flexibility under updated European and Taiwanese regulations, letting them better match TSMC’s growing dominance.
The company’s shares were steady in early Wednesday trading in Taipei, showing no sign of slowing.
And while other markets have faced similar single-stock dominance (like Alibaba in Hong Kong and Samsung Electronics in South Korea), TSMC’s situation is way too different, as it is the only stock in Asia worth over $1 trillion, so its sheer scale is overwhelming portfolios across continents.
To keep up, some managers are using derivatives like futures and options to mirror index movements without breaking legal limits, while others are piling into TSMC-linked companies like Hon Hai (known globally as Foxconn) and ASE in efforts to replicate part of TSMC’s momentum through its supply chain.
But these substitutes can only go so far. John Tsai, a portfolio manager at Eastspring Investments in Singapore, said the scale of TSMC’s weight has made risk management difficult.
“We are forced to consider other high-correlated stocks that may have the same fundamental drivers and build positions in these stocks to try to replicate a meaningful exposure,” John explained.
The problem though is:- “It’s hard to find a proxy that replicates TSMC’s combination of market position, growth trajectory, and stability,” Roxy admitted. “The weight keeps rising, and our underweight position keeps widening.”
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