The Taiwan Stock Exchange experienced a significant drop of 3.53% in its first trading session of the Year of the Snake. This decline was attributed to growing concerns over a potential trade war and the emergence of a cost-effective model in the global artificial intelligence (AI) sector during the Lunar New Year holiday.

The electronics sector, a key player in the market, reacted strongly to the news of U.S. President Donald Trump’s tariffs on several countries, including Canada, Mexico, and China. Additionally, disruptions caused by the China-based AI startup DeepSeek and its budget-friendly AI model further exacerbated the market downturn.

The Taiex, Taiwan’s weighted stock index, closed at 22,694.71, marking a decrease of 830.70 points. The market opened significantly lower, breaching key technical support levels and continuing to slide as semiconductor stocks faced immense pressure. Despite a minor rebound, the Taiex remained near the 22,600 points mark throughout the session.

Taiwan Semiconductor Manufacturing Co. (TSMC), a major player in the market, saw a notable decline of 5.73%. TSMC’s losses alone contributed significantly to the overall drop in the Taiex. Other semiconductor stocks, such as ASE Technology Holding Co. and Scientech Corp., also experienced notable decreases.

However, amidst the broader downturn, MediaTek Inc., a smartphone IC supplier, managed to buck the trend with a 2.39% increase. On the other hand, Taiwanese contract electronics manufacturers operating in Mexico faced challenges, with companies like Hon Hai Precision Industry Co. and Quanta Computer Inc. witnessing significant declines.

Foreign institutional investors were observed as net sellers, offloading shares worth NT$74.40 billion, marking one of the largest net sell-offs in the market’s history. While the electronics sector bore the brunt of the sell-off, non-tech stocks displayed a mixed performance.

Looking ahead, analysts advise investors to closely monitor developments, particularly how Trump’s proposed tariffs on chips could impact the market. The technical support level around 22,605 points, represented by the 120-day moving average, will be a key indicator to watch.

In conclusion, the Taiwan Stock Exchange’s sharp decline reflects the prevailing uncertainties in the global trade landscape and the evolving dynamics within the AI sector, underscoring the need for market participants to remain vigilant amid these challenging times.