TAIPEI (Reuters) -Taiwan stocks closed higher on Tuesday from a record plunge on Monday, with contract chipmaker TSMC up 8%, but sentiment remains cautious amid lingering investor concerns about the outlook for tech companies and the U.S. economy.

The main index ended up 3.4% after climbing to as high as 20,640.44 points during the session. It plummeted a record 8.4% on Monday along with global markets amid fears the United States could be heading for recession and as investors sought refuge from riskier assets.

Shares in the dominant technology stock TSMC, the world's largest contract chipmaker, finished up 8%. TSMC is the world's largest contract chipmaker and a supplier to Nvidia.

"Investors are mostly concerned about the U.S. economy and the rapid rise of the yen. So yesterday's plunge was inevitable," said Jeff Chang, chairman of Cathay Securities Investment Trust, which oversees more than T$1 trillion ($30.3 billion) in client assets.

"We think the Taiwan main index has dropped to a level with strong technical support. But we can expect to see consolidation for a while," he said.

"Looking at fundamentals of the AI industry, nothing has changed compared to a month ago. It's a good buying opportunity for AI shares, both now and when they dip in the future," Chang said.

Other major-weighted tech stocks also rebounded. Mediatek ( MDTTF ) was up 8.5% while Quanta rose 3.1%.

Premier Cho Jung-tai told reporters on Tuesday the fundamentals of Taiwan's economy were "very solid", adding authorities will closely monitor the market situation.

Taiwan Stock Exchange President Lih-Chung Chien has said the bourse would work with regulators to maintain stability when needed.