TSMC expected to post strong earnings but Trump comments hit shares

By Ben Blanchard and Faith Hong

TAIPEI (Reuters) – TSMC, the dominant maker of chips used in artificial intelligence applications, is expected to report another strong quarterly profit on Thursday but its Taipei shares fell 4 percent, pressured by comments from Donald Trump on Taiwan.

While TSMC stock — and the broader Taiwan market — had hit record highs, it began to fall on Wednesday after Trump, the Republican presidential candidate, said Taiwan “has taken over about 100% of our chip business” and should pay the United States for its defense.

TSMC’s American depositary receipts fell 8% on Wednesday, even though the company is expected to report a 30% jump in second-quarter earnings later Thursday. The broader Taiwan market fell 2% early Thursday.

“Trump's comments may have a political impact but they will not change the fundamentals of the market,” said James Huang, chairman of Taipei-based Franklin Templeton Sino-Am Financial Investment Management.

“Big companies are still very bullish on AI and are investing heavily in AI. We don’t see Trump’s comments changing that,” Huang added.

Taiwan Semiconductor Manufacturing Company (TSMC), the world's largest contract chipmaker whose customers include Apple and Nvidia, has benefited from the surge in AI adoption.

Taiwan Chipmaker is set to report net income of NT$238.8 billion (US$7.33 billion) for the quarter ended June 30, according to LSEG’s SmartEstimate, which was compiled from 21 analysts. SmartEstimate gives greater weight to forecasts from analysts with higher accuracy.

This estimate compares to a net profit in the second quarter of 2023 of NT$181.8 billion.

TSMC last week reported a rise in second-quarter revenue in Taiwanese dollars, comfortably beating market expectations. The company will provide third-quarter revenue guidance in U.S. dollars.

On Wednesday, shares of ASML, the world's largest supplier of computer chip manufacturing equipment and for which TSMC is a major customer, fell sharply amid concerns that pressure from the U.S. government could lead to tighter restrictions on its exports to China.

Investor concerns overshadowed second-quarter earnings at Europe's largest technology company, which beat expectations.

peak season

TSMC, during its quarterly earnings call starting at 0600 GMT on Thursday, will update its outlook for the current quarter as well as the full year, including its capital expenditures, as it accelerates production expansion.

TSMC is spending billions of dollars building new factories overseas, including $65 billion on three plants in Arizona, although it has said most manufacturing will remain in Taiwan.

The story continues

In its last earnings call in April, TSMC maintained its guidance for capital spending this year at $28 billion to $32 billion, compared with $30.45 billion last year, and said 70% to 80% of the total would go toward advanced technologies.

The second half of the year is traditionally the peak season for Taiwanese tech companies as they race to supply customers ahead of the year-end holiday season in major Western markets.

The AI ​​boom has helped lift the share price of Asia’s most valuable listed company, with Taipei-listed TSMC shares jumping 68% so far this year compared with a 30% gain for the broader market.

TSMC, referred to in Taiwan as the “sacred mountain that protects the country” for its crucial role in Taiwan’s export-reliant economy, faces little competition, though both Intel and Samsung are trying to challenge its dominance.

(1 USD = 32.5700 NTD)

(Reporting by Ben Blanchard and Faith Hong; Editing by Christopher Cushing and Muralikumar Anantharaman)