Why Taiwan Semiconductor Manufacturing Company Shares Are Volatile

Benzinga · 10/15 19:45

Shares of Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) the world's largest contract chipmaker, dropped 2.74% to $186.95 in Tuesday's trading. Shares of chip stocks are trading lower in sympathy with ASML, which fell after issuing soft guidance. Some stocks in the sector may also be down on reports indicating the U.S. is discussing curbing chip exports to some countries.

What’s Happening: ASML’s revised 2025 guidance, which scaled back expected revenue to between €30 billion and €35 billion from the previous range of €30 billion to €40 billion, has raised alarms over a potential slowdown in key semiconductor market segments.

Despite continued strong demand for AI-related chips, ASML cited a slower-than-anticipated recovery in other critical markets, sparking concerns of cautious spending from major semiconductor manufacturers, including TSMC.

TSMC, which accounts for a significant portion of global semiconductor production, is a key customer of ASML's cutting-edge lithography equipment, particularly its extreme ultraviolet (EUV) systems used for advanced chip fabrication.

ASML's warning of a more gradual recovery in demand suggests that capital expenditure plans across the semiconductor industry could face delays or reductions.

For TSMC, which has been investing in expanding its manufacturing capabilities and advancing its technology nodes to meet growing demand for high-performance chips, any slowdown in equipment availability or delayed expansion could directly impact production timelines and growth expectations.

What Else: The ripple effect of ASML's outlook downgrade has fueled broader concerns about the state of the semiconductor market. While TSMC has been benefiting from the surge in demand for chips used in AI, cloud computing and automotive applications, a key driver of future growth, it also remains exposed to more traditional segments, such as consumer electronics and smartphones, which have seen weaker demand.

If the recovery in these markets continues to lag, it could put additional pressure on TSMC's order book and revenue outlook.

TSMC has been navigating a complex global environment, balancing its leadership in semiconductor technology with geopolitical tensions and supply chain challenges.

The company is in the process of expanding its manufacturing footprint outside of Taiwan, including new facilities in the U.S. and Japan, as part of its strategy to meet rising global demand and mitigate risks.

However, ASML's lowered outlook raises concerns that TSMC's ambitious expansion and technology upgrade plans could face delays, especially if key customers across different market segments continue to exercise caution with their spending.

Should I Sell My TSM Stock?

Whether to sell or hold a stock largely depends on an investor's strategy and risk tolerance. Swing traders may sell an outperforming stock to lock in a capital gain, while long-term investors might ride out the turbulence in anticipation of further share price growth.

Similarly, traders willing to minimize losses may sell a stock that falls a certain percentage, while long-term investors may see this as an opportunity to buy more shares at a discounted price.

Shares of Taiwan Semiconductor have gained 105.82% year to date. This compares to the average annual return of 20.94%, meaning the stock has outperformed its historical averages. Investors can compare a stock's movement to its historical performance to gauge whether this is a normal movement or a potential trading opportunity.

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TSM has a 52-week high of $194.25 and a 52-week low of $84.95.