The move is supposed to help the country’s technology firms enter the fledgling sector.
Minister of Science and Technology Liang-Gee Chen said: "The importance of AI for Taiwan is apparent through its semiconductor companies. Right now, they have an opportunity to enter the sphere of AI, and Taiwan needs to grab onto this opportunity."
While mainland Chinese companies, such as Baidu, have made large investments in AI applications, Taiwan hopes to supply technology to these firms in the future, Chen said.
Taiwan will build three to four innovation centres, and will seek to work with domestic and international technology firms, including Nvidia Corp, a leader in AI chips.
The funding will also help attract research and engineering talent, both from within and outside the island, Chen said.