Market Turbulence Puts Pressure on Taiwan Semiconductor Manufacturing

The shares of Taiwan Semiconductor Manufacturing (TSMC) experienced a significant decline today, attributable to the generally negative sentiment in the semiconductor sector. Additionally, a report from Japan surfaced, invoking known fears among investors. At the time of this report, TSMC shares were down by 5.8%, while the Nasdaq Composite had fallen by 2.3%. This indicates a broader market movement. Semiconductor stocks like TSMC often follow the trajectory of their market leader, Nvidia. Today, Nvidia shares plummeted despite no company-specific news being released. Investors seemingly questioned the sector's valuations after Nvidia exceeded second-quarter estimates last week, albeit less spectacularly than expected. TSMC is sensitive to the overall demand for semiconductors and AI components. Any skepticism regarding whether demand will meet expectations further burdens the stock price. Another factor is the ongoing conflict between Japan and China over export restrictions for microchips. This development could unsettle investors, as the military threat from Beijing is considered one of the largest long-term risks for TSMC. The U.S. is pressuring Japan to further restrict exports of advanced chip technologies to China, while China is threatening economic retaliation, including withholding rare earth elements and other minerals needed for technologies like automotive production. Although Beijing poses a risk to TSMC, the company remains one of the more secure stocks in the industry. The demand for TSMC's services will continue, regardless of who wins the race for AI supremacy. The company's recent results have also been strong. Revenue increased by 45% in July, and the company is expected to provide an update for August soon. TSMC may currently offer a good opportunity for a favorable entry. The company is growing rapidly, has a reasonable valuation, and possesses significant competitive advantages.