Photo by Steve Johnson on Unsplash
 

The entire AI boom hangs by one thin wire.
And that wire runs straight through Taiwan.
Let me explain.

Everyone’s talking about AI stocks. NVIDIA (NVDA), Microsoft (MSFT), Meta (META), Google (GOOGL). The so-called “Magnificent Seven” now make up more than a third of the S&P 500. NVIDIA alone is worth around 4.5 trillion dollars and makes up 7% of the entire index. Their share price has gone to the moon. Everyone’s betting that demand for AI chips will keep exploding.

But here’s the catch. NVIDIA doesn’t actually make chips. Neither does Apple (AAPL). They design them. The blueprints, the architecture, the software. But the actual manufacturing, the physical creation of those tiny three-nanometer miracles, happens somewhere else. And that “somewhere else” is almost entirely one company: TSMC, the Taiwan Semiconductor Manufacturing Company (TSM).

TSMC makes between 80 and 90 percent of the world’s most advanced chips. We’re talking about the brains behind NVIDIA’s H100s and B200s, Apple’s M-series, every big AI system you’ve heard of. If you’re training an AI model right now, odds are the chips doing the work were born in Taiwan.

Now here’s where it gets scary. There are only two companies on Earth capable of making chips at that scale: TSMC and Samsung. And Samsung still struggles with yields, meaning too many chips come out defective. So, in practice, the world has exactly one reliable producer of the chips driving this entire AI revolution.

And those chips rely on another rare thing: the EUV machines built by ASML in the Netherlands. Each one costs around 300 to 400 million dollars, and only a few hundred exist. Without ASML, you can’t make the chips. Without TSMC, you can’t produce them at scale.

Now, think about where TSMC is based. Taiwan. A country that China considers its own territory. U.S. intelligence believes Xi Jinping wants the Chinese military ready for invasion by 2027. China’s been running landing drills, building ferries that can transport troops, and testing amphibious vehicles. I’m not saying it will happen tomorrow, but it’s not fantasy either.

And if something did happen, TSMC has said it could not keep producing chips for Western clients under Chinese control. Which means the global AI boom, everything from ChatGPT to Tesla’s (TSLA) autopilot, could grind to a halt almost overnight.

People often say, well, there’s a new factory in Arizona, right? TSMC is building there. True. But it’s years behind schedule. The local engineers don’t have the decades of experience that TSMC’s Taiwanese teams have. And even when it does open, it will only produce four-nanometer chips. The really cutting-edge ones, the three-nanometer and soon two-nanometer nodes, will still be made in Taiwan.

So yeah, the U.S. is spending billions on the CHIPS Act. Intel (INTC), Samsung, and TSMC are all expanding on American soil. But building the full ecosystem, the workers, materials, and supply chains, takes a decade. Maybe more.

That’s why this whole AI boom feels so fragile to me. It’s not built on hype. It’s built on a bottleneck. One single company sitting in one politically unstable place. If that link breaks, the whole chain snaps.

More By This Author: