- Trump’s comments caused a sharp decline in TSMC’s stock price, but its overall earnings are expected to continue rising.
- Trump’s remarks will boost stocks like Intel and GlobalFoundries due to their alignment with his agenda, impacting the stock market.
OUR TAKE
Trump’s remarks as a presidential candidate have led investors to shift from TSMC to its competitors, impacting the stock market and reflecting heightened geopolitical risks, while boosting stocks like Intel and GlobalFoundries due to their alignment with Trump’s agenda and causing a decline in TSMC’s market performance despite the AI boom.
— Yasmine Luo, BTW reporter
What happened?
Former U.S. President Donald Trump criticised Taiwan for monopolising the U.S. chip business and suggested Taiwan should pay for U.S. defence. This led to a 2.37% drop in TSMC’s stock to NT$1,030 and a nearly 4% drop in its American Depository Receipts.
“I know the people very well, respect them greatly. They did take about 100% of our chip business. I think, Taiwan should pay us for defence,” Trump said in an interview. “You know, we’re no different than an insurance company. Taiwan doesn’t give us anything,” he added.
Despite this, TSMC is expected to report a 30% increase in Q2 profit, with forecasts projecting a net profit of NT$238.8 billion ($7.32 billion), up from NT$181.8 billion ($5.57 billion) last year.
Last week, TSMC reported significant Q2 revenue growth and will update its quarterly and full-year outlook during its earnings call on Thursday. The company is investing $65 billion in new factories, including three plants in Arizona, while maintaining most manufacturing in Taiwan.
TSMC kept its 2023 capital spending guidance at $28 billion to $32 billion, with a majority allocated to advanced technologies. The AI boom has driven TSMC’s stock up 74% this year, compared to a 31% gain for the broader market.
Also read: TSMC soars 30%: AI chip craze fuels a profit leap in Q2
Also read: TSMC unveils A16 chip technology for faster AI chips
Why it’s important
Trump’s remarks as a strong presidential candidate have significantly influenced investor behaviour. Some, considering geopolitical factors, have stopped buying TSMC stocks and instead turned to shares of TSMC’s competitors, impacting the stock market.
Ajay Rajadhyaksha, head of global research at Barclays, noted that the recent decline in chip stocks reflects investors’ heightened focus on geopolitical risks with Trump’s increasing election chances. Analysts observed that chip stocks like Intel and GlobalFoundries rose due to their alignment with Trump’s “Make America Great Again” agenda and substantial domestic manufacturing capabilities.
Ted Mortonson, a technology strategist at Baird, stated, “The AI frenzy has driven significant stock price increases for companies like Microsoft and Nvidia this year. As the world’s largest contract chipmaker, TSMC’s market performance has been heavily impacted by Trump’s comments, resulting in a substantial decline in its stock price.”
