On Reunification
I don’t like prefacing stuff/hedging my speech, when I speak. With that said, with sensitive matters such as these, it is important to cut through things with the blade of nuance, especially with matters that have strong emotional import for all parties involved. With that said, it’s worth saying that I don’t have an opinion this way or that on the topic reunification (or not) between the Republic of China and People’s Republic of China.
Also, also, I purposefully made the title of this post as boring as possible because I’m not trying to getting this viral (honestly quite unlikely given how poorly I realize that I communicate) and tank the markets in advance.
I digress.
So what’s at issue?
Ok, so this is something that I’ve had on my radar for a while now. Yet, I don’t know that I’ve seen that much analysis of the matter anywhere. To be fair, I know how the news cycle works; it’s the most urgent thing that takes up all the oxygen in the room. Which is all well and good and fair enough.
So, what’s it? For a few years now, China and its premier have announced in advance that they would move to reunite the island of Taiwan with the mainland of China.
But I’m sure you are asking, why is this important? Why does it figure into anything?
The simple way I can put this in one sentence is this: If China moves on Taiwan, global markets are going to hiccup in a way that we’ve likely not seen since 2008.
Ok so you may be asking the question: why are we so sure that there are going to be any market upheavals?
It’s very simple. There are two ways to look at it. The first part is that anytime there’s geopolitical tension in that way and there are acute fears, markets respond accordingly. And we’ve not seen, since say the Cuban Missile Crisis a rousing of tensions between world powers in the way that it’s likely to happen if China moves on Taiwan. Anyway, more on this later.
Now why are we so sure that it would rouse tension?
For no other reason than somehow it seems to be US foreign policy that Taiwan and separately Japan are under the US protective umbrella. There’s a bit of uncertainty as to whether the current administration will keep to that promise especially at the risk of tensions with a fellow nuclear power. We honestly don’t know. There are several reasons in either direction for which that would be the case. So with that said there’s a potential flashpoint that is on the horizon.
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Okay but how do we know the timing? Um, because the Chinese government said so. They said they’d move on Taiwan in 2027. Personally, I believe that if that is to be the case, then pieces for it would start to fall into place by Q3 this year.
Now back to why a move on Taiwan will have such devastating effects. There’s no other way to say it:
- The high end AI chips supply chain has many bottlenecks. The most egregious one is TSMC. It holds a staggering 70% of the market.
- NVIDIA is HIGHLY reliant on the supply of chips from TSMC
- The gains in the US markets are propped up by the gains in Nvidia and FAANG companies.
And remember that little thing that happened where the US banned NVIDIA from selling AI chips to Chinese customers. I mean tbf , there’s still a ban on rn. China can’t access Blackwell chips. What’s the glossary of return service options available to China when it’s their turn to serve?
Oh boy.
Hey you could say — and omo, you may well be right in saying so — that the eventual picture I’ve painted may be a bit extreme. The wild thing about markets is that
So imagine that there’s a blockade of any sort even if it’s a blockade of two weeks it’s enough to send NVIDIA stock straight down to zero and of course the American stock markets with it, because of the massive exposure all the players have NVIDIA (do you remember that AI bubble diagram?).
Yeah we have some fun months ahead. Grab your popcorn.
Fun Follow-up Read: https://www.nytimes.com/2026/02/24/technology/taiwan-china-chips-silicon-valley-tsmc.html
PS
To pre-answer any DMs I’m likely to get:
- Your canary in the mine will likely be the prediction markets but I doubt that they’re a leading indicator, any more than a confirmation right before dominoes start to fall (but it usually means someone has material non-public knowledge).
- I haven’t decided fully how I’d play it, whether: A) going flat in August and waiting to buy blood at the aftermath of the blockade or B) Taking Michael Burry style positions and then rolling profits into A). 🤷🏿♂️ We’ll see.
