TSMC Shares Volatile Amid Geopolitical Tensions and Strong Earnings Report
- TSMC reported earnings that exceeded market expectations, showcasing strong financial performance.
- However, the company's shares experienced volatility due to recent geopolitical developments involving the United States.
- This situation highlights the delicate balance between strong corporate earnings and external political influences.
Shares of Taiwan Semiconductor Manufacturing Company (TSMC) experienced significant fluctuations last week, influenced by geopolitical developments in the U.S., despite the company reporting second-quarter earnings that surpassed expectations. Following reports of potential tighter restrictions, TSMC's stock, along with other semiconductor shares, saw a decline. Notably, China represented 16% of TSMC's net revenue in Q2 2024, a rise from 9% in Q1, highlighting the growing importance of the Chinese market to the company. In a recent interview, former President Donald Trump suggested that Taiwan should financially contribute to U.S. defense efforts, asserting that Taiwan has taken a substantial share of America's semiconductor business. This commentary, coupled with concerns over export restrictions, contributed to the volatility in TSMC's stock price. However, TSMC's earnings report on Thursday revealed stronger-than-expected revenue and profit figures, providing some reassurance to investors. Despite the geopolitical concerns, analysts remain optimistic about TSMC's future. Over July 18 and 19, 22 out of 42 analysts covering TSMC raised their price targets, indicating a potential upside of 30.5%. Notably, Needham increased its price target for TSMC's U.S.-listed shares from $168 to $210, citing a robust outlook for the firm's foundry business. Morningstar analysts noted that while Trump's comments and the potential for new export restrictions could create uncertainty, the direct impact on TSMC is likely limited, as most of its customers are based in the U.S. or Taiwan. They also highlighted ongoing challenges in advanced packaging capacity for AI chips, suggesting a modest risk of oversupply in the near future.