Tensions are still high around Taiwan, as evidenced by the G7 meeting in Japan this weekend. For all that, the MSCI TAIWAN (STRD) has gained +5.11% in the last five days. This is a reflection of the island's key position in the global semiconductor market.

The demand for semiconductors and chips has increased significantly due to the rapid growth of digital technologies, including smartphones, computers, connected objects and electric vehicles. The COVID-19 pandemic has also contributed to this increase in demand as people have been working and studying at home more, leading to an increase in sales of electronic devices.

Yet Taiwan happens to be a key player in semiconductor production, home to companies such as Taiwan Semiconductor Manufacturing, the world's largest semiconductor manufacturer. Tensions between China and Taiwan could potentially disrupt semiconductor production, as China claims sovereignty over Taiwan and relations between the two countries are strained.

At the same time, geopolitical tensions between China and the United States are impacting semiconductor and chip production and distribution. China is seeking to strengthen its position in the sector and reduce its dependence on foreign suppliers, notably by investing heavily in research and development. Production plants are struggling to keep up with growing demand, leading to bottlenecks in the supply chain.

Currently Taiwan's export orders declined for the eighth month in April and fell short of expectations due to fears of an economic downturn. For its part, the U.S. has imposed trade restrictions on some Chinese companies, and China is returning the favor.

AI is trending in the markets because it promises to revolutionize the economy. The companies that are benefiting the most are those that focus on innovative technologies, such as NVIDIA, which has taken +100% since the beginning of the year, Micron Technology, Synopsys, or Super micro computer. Not surprisingly, investor interest in AI is boosting the chip sector more.

How to invest in AI?

In addition to the previously mentioned companies in the semiconductor sector, it is important to consider large caps such as Microsoft and Alphabet when looking to invest in artificial intelligence. These technology leaders offer strong investment opportunities due to their market dominance and ability to innovate. Competition in AI innovation is already well underway, as evidenced by Alphabet's development of the Bard chatbot, Microsoft's equivalent of OpenAI's ChatGPT.

To diversify and reduce risk, it's possible to combine big data-focused ETFs with a stock selection strategy for your portfolio. The AMUNDI STOXX GLOBAL ARTIFICIAL INTELLIGENCE UCITS ETF, with net dividends reinvested, is mainly composed of stocks such as IonQ, BlackBerry and Wistron Corp. It is very broad as it totals 290 stocks. The Xtrackers Artificial Intelligence & Big Data UCITS ETF 1C - USD, consisting of 80 companies, is also an interesting option. It includes companies such as Apple, NVIDIA, Salesforce, Bank of America. It reflects the performance of global developed and emerging market stocks with high exposure to artificial intelligence themes. As can be seen below, investors started out favoring big players over small innovative companies to bet on AI: hence the mismatch between the two ETFs.

The difference is also striking when we compare the gap between the MSCI World (a somewhat generalist index) and the NASDAQ 100 , which is made up of more technology stocks, hence the more dazzling performance on the upside. In fact, the S&P 500 is up 8% this year. Without the big technology stocks, it would be down 2% according to SG CIB.


Geopolitical issues are not the only threats in the technology industry. Cyber attacks and regulatory threats can also have a significant impact on companies. Currently, Meta, the parent company of Facebook, is facing a historic €1.2 billion financial penalty imposed by the Irish Data Protection Authority. Meta plans to challenge this decision.