A SELL-OFF in Taiwan Semiconductor Manufacturing Company (TSMC) shares looks almost inevitable when trading resumes after a two-day typhoon break, during which global investors dramatically soured on the promises of artificial intelligence (AI).
Investors sold off US Big Tech stocks over the past couple of sessions, as lacklustre earnings from Tesla and Alphabet set off a reckoning on the AI hype. TSMC may play catch-up to the losses seen in its American Depositary Receipts, which are down nearly 6 per cent over the past two sessions.
The latest tech rout adds further pressure on the world’s largest contract chipmaker, whose record-breaking rally has been faltering since mid-July. A favoured AI play due to its cutting-edge chips and a stellar run of earnings, concern over pricey valuation and the risk of tighter US curbs on chip sales to China have poured cold water on the bullish momentum.
TSMC’s Taiwan listing has fallen nearly 10 per cent from its peak. Further declines would spell trouble for the local financial market given the stock’s outsized influence. It accounts for more than a third of the benchmark Taiex Index, and outflows will hurt the Taiwan dollar, which is hovering near the lowest since 2016 against the greenback.
TSMC’s recent drop could be due to profit taking while “whispers of a potential slowdown in the AI investment boom might also be at play”, said Manish Bhargava, chief executive officer at Straits Investment Management. “The wider context of AI momentum can’t be dismissed. The burning question is – is the AI rally running out of steam?”
A TSMC spokesperson said there has been no impact from the typhoon as at Thursday (Jul 25).
Taiwan’s US$2.5 trillion stock market was shut on Wednesday and Thursday as the deadly Typhoon Gaemi approached after inundating the Philippines. The last time that Taipei was shut for two days in a row for a typhoon was in 2016. BLOOMBERG
