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Introduction
TSMC, the world’s leading manufacturer of chips used in artificial intelligence (AI), is expected to report impressive quarterly earnings. However, the company’s shares have recently taken a hit, influenced by comments from Donald Trump concerning Taiwan’s chip industry.
Strong Earnings Amid Stock Slump
Despite reaching record highs, TSMC’s stock fell by 4% following Trump’s statements. Trump, the US presidential candidate, claimed that Taiwan had taken over 100% of the US chip business and suggested Taiwan should compensate the US for its defense. This led to an 8% drop in TSMC’s American Depository Receipts and a 2% decline in the broader Taiwan market.
Market Fundamentals Remain Strong
James Huang, chairman of Franklin Templeton SinoAm Securities Investment Management in Taipei, believes that while Trump’s comments may have political implications, they are unlikely to affect market fundamentals. Major companies continue to be optimistic about AI and are investing heavily in this sector. Huang emphasized that Trump’s remarks will not change this trend.
TSMC’s Financial Performance
TSMC, a key supplier to companies like Apple and Nvidia, has greatly benefited from the surge in AI adoption. The company is expected to report a net profit of T$238.8 billion ($7.33 billion) for the quarter ending June 30. This is a significant increase from the T$181.8 billion net profit reported in the same quarter last year.
Last week, TSMC reported a notable increase in Taiwan-dollar denominated second-quarter revenue, surpassing market expectations. The company is also set to provide third-quarter revenue guidance in US dollars during its upcoming earnings call.
Impact on Related Companies
ASML, the largest supplier of computer chip-making equipment and a major supplier to TSMC, also saw its shares fall due to concerns over potential US government restrictions on exports to China. Despite these concerns, ASML reported second-quarter earnings that exceeded forecasts.
Peak Season and Future Outlook
The second half of the year is traditionally a peak season for Taiwanese tech companies, including TSMC, as they prepare to meet year-end holiday demand in Western markets. TSMC’s stock has surged 68% this year, driven by the AI boom, compared to a 30% increase in the broader market.
During its earnings call, TSMC will update its outlook for the current quarter and the full year, including its capital expenditure plans. The company is investing billions in new factories overseas, including $65 billion on three plants in Arizona, though most manufacturing will remain in Taiwan.
Conclusion
Despite recent stock volatility, TSMC continues to demonstrate strong financial performance and remains a critical player in the AI chip market. The company’s investments and strategic plans indicate sustained growth and a positive outlook for the future.
FAQs
What did Donald Trump say about Taiwan’s chip industry?
Donald Trump claimed that Taiwan had taken over 100% of the US chip business and suggested that Taiwan should compensate the US for its defense.
How did TSMC’s shares react to Trump’s comments?
TSMC’s shares fell by 4%, and its American Depository Receipts dropped by 8% following Trump’s remarks.
What is TSMC’s expected net profit for the second quarter?
TSMC is expected to report a net profit of T$238.8 billion ($7.33 billion) for the quarter ending June 30.
What impact did Trump’s comments have on the broader Taiwan market?
The broader Taiwan market fell by 2% early on Thursday after Trump’s comments.
How has the AI boom affected TSMC’s stock?
TSMC’s stock has surged 68% this year, driven by the increasing adoption of AI technologies.
What are TSMC’s plans for capital expenditure this year?
TSMC plans to spend between $28 billion and $32 billion on capital expenditure, with 70% to 80% allocated to advanced technologies.
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