Grasp the pulse of the stock market: How large-cap stocks determine your profit direction

Why Are Blue-Chip Stocks a Must-Read for Stock Market Investors

Many novice investors in the stock market are unfamiliar and curious about the term “blue-chip stocks.” Simply put, blue-chip stocks refer to publicly listed companies with the largest market capitalization in the stock market and the most influence on the index. When TSMC’s stock price moves up or down by 1 yuan, the Taiwan Weighted Index will fluctuate by about 8 points. The underlying logic is the market position of blue-chip stocks.

Why should you pay attention to blue-chip stocks? The answer is quite straightforward—these companies not only have large scales but also represent the overall market trend. When blue-chip stocks collectively rise, retail investors usually follow; when they lead the decline, market sentiment also cools down. Therefore, grasping the movement of blue-chip stocks is equivalent to capturing the pulse of the stock market.

Core Advantages of Blue-Chip Stocks

Investors tend to focus on blue-chip stocks mainly because of the following characteristics:

• Solid fundamentals: These are industry leaders or large-cap companies, such as TSMC, Hon Hai, Chunghwa Telecom, etc., with stable long-term operations and strong profitability.
• Consistent cash flow and dividends: Most blue-chip stocks pay dividends on time every year, making them highly attractive to investors seeking stable cash returns.
• Outstanding resilience: Due to long-term holdings by institutional investors and large shareholders, their stock price volatility is usually much lower than that of small- and mid-cap stocks.
• Market thermometer: The performance of blue-chip stocks often predicts the direction of the overall market, providing important reference value for technical analysis and capital flow tracking.

Top 20 Market Cap Rankings in Taiwan Stock Market as of Mid-October 2025

Below are the 20 stocks with the highest market cap share within the Taiwan Weighted Index as of mid-October 2025:

Key Observation: TSMC dominates with over 40% market share, meaning the overall movement of the Taiwan index is almost entirely tied to TSMC’s performance.

The Top 10 Blue-Chip Stocks in the US S&P 500 Index

Compared to the concentration in Taiwan stocks, the distribution of blue-chip stocks in the US is more dispersed, but their influence is equally profound:

Market Insight: The AI chip concept has propelled NVIDIA and Broadcom to become emerging blue-chip stocks. Tech giants dominate the top ten, reflecting the global capital market’s optimistic outlook on artificial intelligence industries.

In-Depth Analysis of Selected Blue-Chip Stocks in Taiwan

TSMC (2330): The Unbeatable Position of the Foundry Empire

As the global leader in wafer foundry industry, TSMC maintains a market share above 50%. With 3nm process mass production already achieved and 2nm expected to start mass production in 2026, TSMC controls the destiny of tech giants like Apple, NVIDIA, AMD.

In the Taiwan stock market, TSMC’s weight exceeds 30%, making it the most critical force moving the index. Although its stock price valuation is relatively high, its deep technological moat and stable long-term growth make it a “must-hold for long-term investors.” Investing in TSMC is akin to betting on Taiwan’s position in the global semiconductor industry.

Hon Hai (2317): From OEM Factory to Tech Group

Hon Hai Precision has over one million employees and supplies Apple iPhone, Tesla, Amazon, playing an irreplaceable role in the global supply chain. Recently, it has actively transformed into a “tech integration service group” by expanding into AI servers and electric vehicles (MIH platform), with growth potential expanding.

MediaTek (2454): The Dark Horse in Mobile Chips

As the world’s second-largest mobile chip designer, MediaTek has performed remarkably in the mid-to-high-end market (Dimensity series), successfully penetrating supply chains of Samsung, Xiaomi, and others. It is also expanding into AI chips, networking, and automotive electronics, likely benefiting from the long-term growth trends of IoT and AI.

Delta Electronics (2308): A Model of ESG Investment

Delta Electronics is a global leader in power management and automation solutions, with applications spanning data centers, electric vehicles, and industrial automation. Its high-efficiency energy-saving technology is internationally renowned. With a healthy financial structure and stable cash flow, it has consistently paid dividends for years, making it a typical “high-quality blue-chip stock.”

Chunghwa Telecom (2412): A Model of Defensive Blue-Chip Stock

As Taiwan’s largest telecom operator, Chunghwa Telecom has a complete communication infrastructure. Its stable business and ample cash flow, with an average annual dividend yield of about 4-5%, make it one of the few companies in Taiwan that “almost pays dividends every year.” Recently, it has actively developed 5G, cloud, and cybersecurity services, gradually transforming into a digital integrated service provider.

How Blue-Chip Stock Fluctuations Affect Retail Investor Decisions

Blue-chip stocks are not only market barometers but also tools manipulated by governments and large capital. When the government intervenes to stabilize the market, they usually first boost blue-chip stocks to lift the index, encouraging retail investors to follow and boosting confidence. Conversely, if the market overheats, a decline in blue-chip stocks can quickly cool the market sentiment.

Therefore, paying attention to the direction of blue-chip stock fluctuations is more meaningful for decision-making than merely watching the overall index.

Three Strategies for Participating in Blue-Chip Stock Investment

Strategy 1: Direct Stock Investment

If you have sufficient funds and want to participate in corporate growth, you can directly buy industry leaders like TSMC, MediaTek, etc. Before investing, focus on three key indicators: whether revenue and gross profit are steadily growing, whether EPS is continuously increasing, and whether dividend records have been stable for years. Recommended investment horizon: 3 to 5 years or more.

Strategy 2: Dollar-Cost Averaging

If you worry about buying at a high point with a lump sum, you can adopt a dollar-cost averaging approach—set a fixed investment amount and cycle, selecting blue-chip stocks or related ETFs with long-term growth potential, avoiding being misled by short-term fluctuations.

Strategy 3: Blue-Chip ETF Portfolio

For investors who do not want to spend time researching individual stocks, choosing ETFs that track blue-chip stocks (such as 0050, 0056, 00878, etc.) allows holding multiple leading companies at once, effectively diversifying individual stock risk, especially suitable for beginners.

Three Important Tips for Investing in Blue-Chip Stocks

Pay Attention to Overall Market Sentiment

Although blue-chip stocks are market barometers, if only certain blue-chip stocks are strong while the overall index is weak, extra caution is needed. Once a market trend forms, it is hard to change. A single stock’s strength often signals potential subsequent corrections. Therefore, closely monitoring the overall capital market trend is essential for long-term gains.

Understand Industry Outlook Deeply

The reason a company becomes a blue-chip stock is mainly because it holds a representative position in its industry. With rapid changes in technological innovation and policy directions today, assessing industry prospects is crucial. Before investing, ensure the company’s industry has future growth potential.

Conduct Fundamental Research First

Before investing in any blue-chip stock, thoroughly understand its historical stock price trends, operational status, and financial health before making rational decisions. Avoid blindly following trends, as the most common cause of losses in the market is impulsive entries lacking in-depth research.