Taiwan Semiconductor Shares Drop Amid Weak ASML Guidance

On October 15, 2024, shares of Taiwan Semiconductor Manufacturing Company (TSMC), the largest contract chipmaker globally, fell by 2.74% to $186.95. This decline is attributed to a broader downturn in the semiconductor sector, influenced by ASML's recent announcement of reduced revenue guidance for 2025, which raised concerns about a potential slowdown in key markets. Despite strong demand for AI-related chips, ASML's cautious outlook has led to fears of reduced spending among major semiconductor manufacturers, including TSMC. TSMC has been actively investing in expanding its manufacturing capabilities to meet the rising demand for high-performance chips, particularly in AI, cloud computing, and automotive applications. However, the company also faces challenges from traditional markets like consumer electronics and smartphones, which are experiencing weaker demand. The uncertainty surrounding ASML's equipment availability and the potential delays in TSMC's expansion plans could significantly impact the company's production timelines and growth expectations. In response to these market dynamics, TSMC is diversifying its manufacturing footprint by establishing new facilities in the U.S. and Japan. This strategy aims to mitigate risks and address the increasing global demand for semiconductors. Nevertheless, the recent developments have raised alarms about the sustainability of TSMC's ambitious growth trajectory, especially if key customers remain cautious in their spending. Investors are now weighing their options, with some considering whether to sell or hold their TSMC shares, given the stock's impressive year-to-date performance of 105.82%, significantly outperforming historical averages.