Taiwan stocks closed higher on August 12, with the TAIEX rising 191.96 points to 45,120.72 and reclaiming the 45,000 mark after buying in MediaTek and passive component names picked up late in the morning. Turnover fell to NT$869.02 billion, suggesting limited follow-through even as the market stayed in a high-level consolidation range supported by positive July revenue and earnings trends. Large-cap performance was mixed. TSMC rose 0.63%, MediaTek gained 1.52% and Quanta Computer added 0.64%, while Hon Hai Precision Industry and Delta Electronics fell 0.57% and 0.55%. Sector rotation was pronounced, with beaten-down passive component shares rebounding on reports of possible price increases. Walsin Technology, Holy Stone Enterprise and Prosperity Dielectrics all hit limit-up, while Giant Manufacturing surged by the daily limit for a second straight session, lifting Merida and other bicycle-related stocks as investors looked for signs the industry may be bottoming. Institutional investors were net buyers overall, with the three major categories posting a combined net buy of NT$28.01 billion. Foreign institutional investors bought a net NT$22.33 billion, investment trusts bought a net NT$3.22 billion and proprietary dealers bought a net NT$2.46 billion. Even so, foreign institutions remained heavily hedged, with net short TAIEX futures positions still at 88,924 contracts after a slight decline of 277 contracts, while securities lending sales reached NT$21.17 billion. A key catalyst was TSMC and Sony signing a legally binding definitive cooperation agreement on August 11 to set up a joint venture in Koshi City, Kumamoto Prefecture, Japan. Sony will lead research and development, product planning and design for core image sensor technology, while the venture will use TSMC's process and manufacturing capabilities for image sensor mass production. Analysts said the move could strengthen Sony's position in image sensors while giving TSMC another specialized advanced-process application and broader geopolitical diversification. Sentiment was also shaped by global chip developments. Nvidia said it plans to use more than $500 billion in third-party capital to help frontier AI labs, enterprises and AI cloud providers build data centers and other AI infrastructure, and it launched the open-source AI model Nemotron 3.5 Lightning. Microsoft, meanwhile, is preparing to ramp output of its next-generation in-house AI chips and is seeking capacity from TSMC for more than 300,000 Maia 300 units, with delivery expected in 2027. Fundamentals remained supportive. TSMC's July revenue reached about NT$467.58 billion, up 5.6% from June and 44.7% from a year earlier, marking another record high. Market reports also pointed to possible purchases of AUO's L7 and L5C plants near Central Taiwan Science Park to expand advanced packaging (chip assembly technology for high-performance computing) capacity. Taiwan's machinery sector also continued to benefit from semiconductor and AI demand, with exports rising for an 18th straight month in July and the first-seven-month decline in machine tool exports narrowing to 1.5%, though longer lead times for key components could affect future deliveries. Broader markets remained cautious. Oil prices rebounded after U.S.-Iran negotiations stalled, and investors were waiting for U.S. inflation data for clues on the Federal Reserve's rate path. The report said Taiwan equities could keep grinding higher on the back of corporate fundamentals, the TSMC-Sony venture and next week's robotics exhibition, but elevated futures shorts and sub-NT$900 billion turnover argue for caution on volatility. Institutional investors favored a buy-on-dips, sell-into-strength strategy focused on liquid AI heavyweights, while capital was rotating into passive components, bicycles and BBU (battery backup unit) shares.