Taiwan's economy is running hot on AI demand, which is good news for its chipmakers and exporters but raises the risk of overheating.

• Taiwan's official economic gauge stayed at "red" — the top setting, meaning booming or overheating — for the eighth month in a row, the second-longest streak ever.
• AI demand is driving it: factory confidence improved, and export orders, stock prices and chip equipment imports all rose.
• Money supply weakened as foreign investors pulled cash out of the country, the one soft spot in the reading.
• Exports should keep growing as cloud companies build out AI infrastructure and electronics makers stock up for new product launches.
• Middle East instability, U.S. trade policy, interest rate moves in big economies and government debt worries all hang over the outlook.

Outlook: Growth looks set to continue into the second half on AI spending and capacity expansion, unless trade policy or global rates turn against Taiwan.