How is market capitalization weight determined to influence the market trend? An in-depth analysis of leading stocks in Taiwan and the US stock markets

Why Are Investors Watching These Stocks?

Whenever the stock market trend becomes a topic of discussion, you will hear a term—blue-chip stocks. But what exactly are blue-chip stocks? Why are they so important to your investment decisions?

Simply put, blue-chip stocks are the companies with the most “weight” in the market. Just like the Taiwan Stock Exchange Weighted Index is calculated based on market capitalization, the larger a company’s market value, the greater its influence on the index. When TSMC rises by 1 NT dollar, the entire index might increase by 8 points—that’s the power of blue-chip stocks.

How Blue-Chip Stocks Lead Market Momentum

There is a saying circulating in the market: “Judging the overall market direction by watching blue-chip stocks.” This is not unfounded.

High market cap share = greater impact on volatility. In the Taiwan Weighted Index, TSMC accounts for over 30% of the weight, while leading stocks like Hon Hai and MediaTek together make up over 50%. When these giants fluctuate, retail investors and institutional investors alike become nervous, driving overall market sentiment.

Why does the government prioritize lifting blue-chip stocks during market rescue efforts? Because they hold the role of “market compass.” As long as the leading stocks stabilize, market confidence can quickly recover, triggering a rally effect. Conversely, if blue-chip stocks lead a decline, market sentiment drops rapidly.

Three Advantages of Investing in Blue-Chip Stocks

1. Strong Corporate Strength

Companies that become blue-chip stocks are usually industry leaders with solid finances and strong profitability. TSMC controls over 50% of the global wafer foundry market share, and Hon Hai is the world’s largest electronics contract manufacturer—these are not companies that just any business can achieve.

2. Stable Cash Flow and Dividends

Most blue-chip stocks are mature companies, and their biggest appeal to investors is “stable dividends.” Chunghwa Telecom has an average dividend yield of about 4–5%, and TSMC, Hon Hai, and others also have a record of continuous dividend payments. For those pursuing passive income, they are excellent long-term holdings.

3. Relatively Moderate Volatility

Because market funds and institutional investors (such as investment trusts and foreign investors) hold these stocks long-term, their stock price fluctuations are usually much milder than those of small- and mid-cap stocks. This is an advantage for investors with lower risk tolerance.

Overview of Taiwan’s Top 20 Blue-Chip Stocks in 2025

Data as of October 16, 2025

A single TSMC accounts for 40.86%—this data clearly explains why it is the market’s “cornerstone.”

US Major Tech Giants’ Market Capitalization Comparison

The US stock market also follows the blue-chip logic, but the scale is even larger:

Data as of September 30, 2025

The combined market cap of the top five US tech giants exceeds 16 trillion USD. The rise and fall of these five stocks directly determine the direction of the entire US stock index.

Taiwan’s Top Five Blue-Chip Investment Map

TSMC (2330)—The Absolute Leader in Wafer Foundry

With over 50% global market share in wafer foundry, tech giants like Apple, NVIDIA, and AMD queue up for its services. It possesses the world’s most advanced 3nm mass production technology, with 2nm expected to start mass production in 2026.

Its influence on the Taiwan stock index is unmatched. Although its stock price base is high, its long-term growth remains stable, with a high technical barrier and deep moat, making it a “must-hold” stock in the market.

Hon Hai (2317)—The Hub of the Global Supply Chain

The world’s largest electronics contract manufacturer, with over a million employees, producing for giants like iPhone, Tesla, and Amazon. Recently, it has actively expanded into electric vehicles (MIH platform) and AI server businesses, successfully transforming from traditional OEM to a “technology integration service group.”

MediaTek (2454)—The New Force in Chip Design

The world’s second-largest mobile chip designer, with the Dimensity series performing well in mid-to-high-end markets. Besides mobile chips, it is also布局 in AI chips, networking equipment, and automotive electronics, collaborating with TSMC to develop 3nm AI chips.

Delta Electronics (2308)—The Hidden Champion

A global leader in power management and automation solutions, with products used in electronics, industrial automation, electric vehicles, and data centers. Its high-efficiency power technology is internationally renowned, and it has consistently paid cash dividends for many years, making it a typical “ESG star.”

Chunghwa Telecom (2412)—A Defensive Source of Cash Flow

Taiwan’s largest telecom operator, with the most complete communication network infrastructure. Its stable operations and ample cash flow make it one of the few Taiwan stocks that “almost pay dividends every year,” with a stable yield of 4–5%. Recently, it has actively developed 5G, cloud, and cybersecurity businesses, attempting to transform its service model.

Three Investment Paths for Blue-Chip Stocks

Path 1: Direct Stock Purchase

Suitable for investors with sufficient funds and willingness to conduct in-depth research. Focus on three aspects: whether revenue and gross profit are steadily growing, whether EPS is stable, and whether dividend records have been continuous for many years. Recommended investment horizon: 3–5 years or more.

Path 2: Regular Fixed Investment

Worried about buying at a high point in one lump sum? Use fixed periodic investments to average out costs. Set a fixed amount and cycle, and keep investing long-term without worrying about short-term fluctuations.

Path 3: Lazy Investment via Blue-Chip ETFs

Don’t want to spend time researching individual stocks? Simply choose ETFs tracking blue-chip stocks (such as 0050, 0056, 00878). Holding multiple leading companies at once, diversifying risk for peace of mind.

Three Risks of Investing in Blue-Chip Stocks

Warning 1: Only individual stocks rise, but the market falls

If a blue-chip stock rises alone while the index drops, be extra cautious. Once a market trend forms, it’s hard to change. A strong individual stock often signals an impending correction.

Warning 2: Ignoring industry cycle changes

Even the most stable blue-chip stocks cannot resist industry downturns. Technological innovation and policy adjustments can influence market trends. Before investing, assess whether the industry has prospects and is in an upward cycle.

Warning 3: Blindly following the herd into investments

Before investing in any stock, thoroughly understand its historical trend, operational status, and financial data. Especially for blue-chip stocks, which are highly visible and prone to herd mentality. Independent judgment always comes first.

Core Conclusion: The importance of blue-chip stocks is not because they “rise the most,” but because they hold the main control over market direction. Learning to observe the performance of blue-chip stocks is equivalent to learning how to read the market’s pulse.