TSMC Stock Plummets Following DeepSeek Fiasco
Taiwan Semiconductor Manufacturing Co. (TSMC) experienced a sharp decline in its stock prices, marking its most significant drop in nearly six months as trading resumed after the recent holiday. This sudden plummet was in response to a global selloff in artificial intelligence-connected stocks that occurred the previous week. The impact was felt not only by TSMC but also by other related companies, such as Hon Hai Precision Industry Co., which saw a substantial decrease of 9.2%.
The Catalyst: DeepSeek’s AI Model
The catalyst behind this financial turbulence was the unexpected news regarding DeepSeek’s AI model potentially rivaling leading US developers. This revelation sent shockwaves through the chip industry, causing a significant market downturn while Taiwan was closed for the Lunar New Year holiday. The ripple effect was immediate, with TSMC’s shares sliding as much as 6.6%, subsequently impacting the Taiex benchmark, which fell by 4.4%.
Tariff Tensions and Global Implications
Adding fuel to the fire were the looming tariff tensions initiated by US President Donald Trump. With general tariffs set to affect Canada, Mexico, and China, including specific sectors like chips, metals, and drugs, investors are on edge about the potential ramifications on the market. Ken Wong, an Asian equity portfolio specialist at Eastspring Investments, noted that the impact on TSMC shares was already factored into the ADR price movement. As a result, companies with production exposure in Mexico, like Hon Hai and Inventec Corp., are bracing for potential repercussions.
Navigating the Uncertainty: Expert Insights
Fund managers and analysts are closely monitoring the situation, reevaluating their portfolios and adjusting their positions in light of recent developments. Gary Tan, a portfolio manager at Allspring Global Investments, emphasized the need to reassess exposure to AI, encouraging investors to explore alternative markets beyond tech hardware and countries like Taiwan and Korea. Despite the challenges posed by DeepSeek’s emergence, industry experts like Charles Shum from Bloomberg Intelligence remain optimistic about TSMC’s long-term prospects. While short-term disruptions may occur, the growing demand for AI inference chips is expected to bolster TSMC’s position in the market.
Looking Ahead: Market Resilience and Investment Strategies
Despite the current volatility, TSMC’s cutting-edge technology and reasonable valuation position the company for potential growth. With a forward earnings multiple of 18 times and favorable comparisons to industry giants like Intel Corp. and Nvidia, TSMC remains an attractive investment opportunity. Moreover, recent reports from companies like Advantest Corp. and ASML Holding NV indicate sustained demand and increased spending in AI-related technologies, offering a silver lining amidst the market uncertainty.
In conclusion, while the recent setback may have rattled investors, TSMC’s resilience and strategic positioning in the market suggest a promising outlook for long-term growth. As the industry continues to navigate challenges and adapt to evolving technologies, companies like TSMC are poised to capitalize on emerging opportunities and drive innovation in the semiconductor landscape.
