Taiwan Central Bank Chief Warns of AI Bubble Risk Amid Tech Sector Over-Leveraging

Taiwan central bank chief warns of AI bubble risk

TAIPEI, July 9 (Reuters) - The governor of Taiwan's central bank said on Thursday that while the growth driving the AI boom is real, so are the risks of an AI bubble. Speaking at a parliamentary hearing, Governor Yang Chin-long told lawmakers that the AI boom has become a major driving force in Taiwan's economy, while warning that the central bank must carefully monitor the risks of speculative capital expenditures financed by aggressive corporate borrowing within the tech sector. "We do ⁠have concerns about the possibility of an AI bubble," Yang said. "AI is driven by real growth potential, but it's the possibility of over-expansion via over-leveraging that concerns us." At the central bank's quarterly meeting in June, its board did not consider inflationary pressures amid the AI boom sufficient to justify an increase in interest rates, although the decision to hold rates steady was not unanimous. The decision was appropriate given the underperformance of traditional industries relative ⁠to the booming tech industry, the governor said. Taiwan plays a crucial role in the global AI supply chain for tech giants including Nvidia (NVDA.O), opens new tab and Apple (AAPL.O), opens new tab, anchored by chipmaker Taiwan Semiconductor Manufacturing Co (TSMC) (2330.TW), opens new tab, which has been leading Taiwanese stocks to ⁠record highs this year. The importance of Taiwan's chip industry for the AI supply chain is reflected by Nvidia CEO Jensen Huang's frequent and high-profile visits to the ⁠island, including his recent major trip for June events, such as Computex and NVIDIA GTC Taipei. TSMC, the world's biggest contract manufacturer of chips that ⁠power AI, said last month that demand remained high with customers still upbeat on the AI outlook, even as it was monitoring the impact of rising component costs. Reporting by Faith Hung Editing by Tomasz Janowski Our Standards: The Thomson Reuters Trust Principles., opens new tab

Taiwan central bank chief warns of AI bubble risk

Speaking at a parliamentary hearing, Governor Yang Chin-long told lawmakers that the AI boom has become a major driving force in ⁠Taiwan's economy, ⁠while warning that the central bank must carefully monitor the risks of speculative capital expenditures financed by aggressive corporate borrowing within the tech sector. The governor of Taiwan's central bank said on Thursday that while the growth driving the AI boom is real, so are the risks of an AI bubble. Speaking at a parliamentary hearing, Governor Yang Chin-long told lawmakers that the AI boom has become a major driving force in ⁠Taiwan's economy, ⁠while warning that the central bank must carefully monitor the risks of speculative capital expenditures financed by aggressive corporate borrowing within the tech sector. "We do have concerns about the possibility of an AI bubble," Yang said. "AI is driven by real growth potential, but it's the possibility of over-expansion via over-leveraging that concerns us." At the ⁠central bank's quarterly meeting in June, its board did not consider inflationary pressures amid the AI boom sufficient to justify ⁠an increase in interest rates, although the decision to hold rates steady was not unanimous. The decision was appropriate given the underperformance of traditional industries relative to the booming tech industry, the governor said. Taiwan plays a crucial role in the global AI supply chain for tech giants including Nvidia and Apple, anchored by chipmaker Taiwan Semiconductor Manufacturing Co (TSMC), which has been leading Taiwanese stocks to record highs this year. The importance of Taiwan's chip industry for the AI supply chain is ⁠reflected by Nvidia CEO Jensen Huang's frequent and high-profile visits to the island, including his recent major trip for June events, such as Computex and NVIDIA GTC Taipei. TSMC, the world's biggest contract manufacturer of chips that power AI, said last month that demand remained high with customers still upbeat on the AI outlook, even as it was monitoring the impact of rising component costs.

The Governor of the Central Bank of Taiwan warns of an AI bubble

Yang Chin-long warns that the country should choose its investments carefully in this highly volatile sector. The governor of the Central Bank of Taiwan, Yang Chin-long, told the country's parliament today that whilst the growth driving AI is real, the entire industry runs the risk of bursting into a bubble. AI has become Taiwan's main economic driver, but the central bank will closely monitor the risks associated with speculative capital investments financed by the "aggressive" borrowing of technology firms, according to Reuters. At the central bank's quarterly meeting in June, its board did not consider the inflationary pressures arising from the AI boom to be sufficient to justify an interest rate rise, although the decision to keep rates unchanged was not unanimous. However, following a reassessment of the sector's volatility, it appears that the central bank's chief's view has changed, or at least shifted towards caution. Jensen Huang, CEO of Nvidia, frequently travels to the island - one of the main hubs for the manufacture of AI chips - and remains optimistic about the future outlook, despite the meteoric rise in the cost of materials.

Taiwan central bank chief warns of AI bubble risk

TAIPEI, July 9 (Reuters) - The governor of Taiwan's central bank said on Thursday that while the growth driving the AI boom is real, so are the risks of an AI bubble. Speaking at a parliamentary hearing, Governor Yang Chin-long told lawmakers that the AI boom has become a major driving force in Taiwan's economy, while warning that the central bank must carefully monitor the risks of speculative capital expenditures financed by aggressive corporate borrowing within the tech sector. "We do have concerns about the possibility of an AI bubble," Yang said. "AI is driven by real growth potential, but it's the possibility of over-expansion via over-leveraging that concerns us." At the central bank's quarterly meeting in June, its board did not consider inflationary pressures amid the AI boom sufficient to justify an increase in interest rates, although the decision to hold rates steady was not unanimous. The decision was appropriate given the underperformance of traditional industries relative to the booming tech industry, the governor said. Taiwan plays a crucial role in the global AI supply chain for tech giants including Nvidia and Apple, anchored by chipmaker Taiwan Semiconductor Manufacturing Co (TSMC), which has been leading Taiwanese stocks to record highs this year. The importance of Taiwan's chip industry for the AI supply chain is reflected by Nvidia CEO Jensen Huang's frequent and high-profile visits to the island, including his recent major trip for June events, such as Computex and NVIDIA GTC Taipei. TSMC, the world's biggest contract manufacturer of chips that power AI, said last month that demand remained high with customers still upbeat on the AI outlook, even as it was monitoring the impact of rising component costs. (Reporting by Faith HungEditing by Tomasz Janowski)