By Ben Blanchard and Faith Hung
TAIPEI (Reuters) – TSMC, the biggest maker of chips used in artificial intelligence (AI) applications, is expected to report strong quarterly results again on Thursday, but the company’s shares fell 4 percent in Taipei, weighed on by Donald Trump’s comments on Taiwan.
While shares of TSMC — and the broader Taiwanese market — have hit record highs, the company began to slide on Wednesday after Republican U.S. presidential candidate Trump said Taiwan had “taken over about 100% of our chip business” and the U.S. should pay for its defense.
TSMC’s American Depository Receipts fell 8% on Wednesday, though it is expected to report a 30% jump in second-quarter profit later on Thursday. The broader Taiwanese market fell 2% on Thursday morning.
“Trump’s comments may have a political impact, but will not change fundamental market conditions,” said James Huang, chairman of Franklin Templeton SinoAm Securities Investment Management in Taipei.
“Large companies are still very optimistic about AI and are investing heavily in AI. We don’t see Trump’s comments changing that,” Huang added.
Taiwan Semiconductor Manufacturing Co (TSMC), the world’s largest contract chipmaker with customers including Apple and Nvidia, has benefited from the growing adoption of AI.
TSMC is expected to report net profit of T$238.8 billion ($7.33 billion) for the quarter ended June 30, according to an LSEG SmartEstimate of 21 analysts. SmartEstimates give more weight to forecasts from analysts that are more consistently accurate.
This estimate compares with net profit of T$181.8 billion in the second quarter of 2023.
TSMC last week reported a jump in Taiwan dollar-denominated second-quarter revenue, which far exceeded market expectations. It will issue a third-quarter revenue forecast in US dollars.
Shares of ASML, the world’s largest supplier of equipment for computer chip production and a major customer of TSMC, fell sharply on Wednesday on concerns that U.S. government pressure could lead to tighter restrictions on exports to China.
Investor concerns overshadowed second-quarter earnings figures from Europe’s largest technology company, which beat expectations.
PEAK SEASON
TSMC will release its guidance for the current quarter and full year, including capital spending, during its quarterly earnings presentation starting at 0600 GMT on Thursday, as the company looks to expand production as quickly as possible.
TSMC is investing billions of dollars to build new factories overseas, including $65 billion in three plants in the U.S. state of Arizona. However, the company has said most production will remain in Taiwan.
In its last earnings report in April, TSMC maintained its forecast for capital expenditures this year at $28 billion to $32 billion, compared with $30.45 billion last year. In addition, TSMC indicated that 70% to 80% of the total amount would go to advanced technologies.
The second half of the year is traditionally peak season for Taiwanese technology companies, as they scramble to supply customers as quickly as possible before the holidays in key Western markets.
The AI boom has boosted the share price of Asia’s most valuable listed company. TSMC’s share price on the Taipei-listed stock exchange has risen 68% so far this year, compared with a 30% rise for the broader market.
TSMC, popularly known in Taiwan as the “sacred mountain that protects the country” for its crucial role in Taiwan’s export-oriented economy, faces little competition, although both Intel and Samsung are attempting to challenge the company’s dominant position.
($1 = 32.5700 Taiwan dollars)
(Reporting by Ben Blanchard and Faith Hung; Editing by Christopher Cushing and Muralikumar Anantharaman)