Counterintuitively, Thompson argues against cutting China off from Taiwan's semiconductor manufacturing (TSMC). A China dependent on Taiwan is less likely to act aggressively toward it. Creating a situation where the U.S. relies on Taiwan while China does not increases the risk of conflict, as China's optimal move could become disabling that key U.S. asset.

The urgency around Taiwan is temporary. As the US (TSMC in Arizona) and China (Huawei) scale their domestic chip fabrication facilities, Taiwan's strategic value as a semiconductor chokepoint will evaporate within 18 months, potentially neutralizing it as a major conflict trigger.

With 97% of high-end chips and 72% of the global foundry market controlled by Taiwan, specifically TSMC, any disruption—from military blockade to cyberattack—would trigger an 'economic apocalypse.' This massive over-concentration creates a singular, fragile chokepoint with no short-term alternative, threatening the entire global economy.

Banning chip sales to China reduces its reliance on Taiwan's TSMC, lowering the economic cost of an invasion. Resuming sales re-establishes this crucial economic link, creating a powerful disincentive for conflict and acting as a geopolitical stabilizer, despite seeming counterintuitive to gaining a direct AI advantage.

Ben Thompson presents a counterintuitive geopolitical argument: allowing China dependency on Taiwan for semiconductors creates a safer equilibrium. Cutting China off removes this critical dependency, potentially making a military strike on TSMC an optimal, if devastating, strategic move for Beijing.

Beyond financial metrics, the most significant 'tail risk' to the AI boom is the high concentration of advanced semiconductor manufacturing overseas, particularly in Taiwan. A geopolitical conflict could sever the supply of essential hardware, posing a much more fundamental threat to the industry's growth than market volatility or corporate overspending.

The US is allowing Nvidia to sell advanced chips to China again. The strategic calculus has shifted from simple resource hoarding to geopolitics: keeping China dependent on Taiwan's TSMC makes an invasion less likely, as it would destroy the very supply chain China needs for its AI ambitions.

Dan Sundheim identifies a potential conflict with China over Taiwan's semiconductor dominance as the single biggest tail risk to the global economy. Since Taiwan produces over 90% of advanced chips, a disruption to this fragile supply chain would be catastrophic, potentially triggering an economic crisis on the scale of the Great Depression.

Recent statements from the CCP suggesting a "peaceful reunification" with Taiwan, potentially driven by an energy crisis, amplify the geopolitical risk to TSMC. This makes investments in non-Taiwanese fabs, like those from Samsung and Intel, strategically critical for the American tech industry.