Taiwan Semiconductor Manufacturing Co. (TSMC) experienced its steepest drop in three months as trading resumed in Taiwan following a two-day suspension due to Typhoon Gaemi. The shares plunged up to 6.5% in Taipei on Friday morning, contributing to a broader tech market sell-off that has gripped global markets as investor enthusiasm for artificial intelligence (AI) wanes.
The decline in TSMC shares led to a significant drop in the Taiex index, which fell more than 4% and neared a technical correction. Other semiconductor stocks, including ASE Technology Holding Co. and MediaTek Inc., also saw substantial declines, with both losing at least 5%.
The tech sector’s recent downturn has been fueled by disappointing earnings reports from major U.S. technology firms, leading to a reassessment of AI investments. TSMC, which had been a major beneficiary of the AI boom due to its advanced chips and strong earnings, is now facing headwinds. Concerns about high valuations and potential new U.S. restrictions on chip sales to China have dampened investor enthusiasm.
Vey-Sern Ling, managing director at Union Bancaire Privee, noted that the tech sector’s retreat has been worsened by underwhelming earnings reports and negative news regarding China tariffs. Ling highlighted that the future direction of the tech sell-off could hinge on upcoming earnings reports from four of the “Magnificent Seven” tech stocks.
TSMC’s stock, listed in Taiwan, has now fallen over 14% from its peak, posing challenges for the local financial market, as TSMC represents more than a third of the Taiex index’s weight. The dramatic shift in stock performance contrasts sharply with earlier in the year, when the surge in AI-related shares spurred an unprecedented investment frenzy in Taiwan, leading to a surge in retail investor activity and prompting warnings from regulators about potential market bubbles.
Manish Bhargava, CEO of Straits Investment Management Pte Ltd, suggested that TSMC’s recent downturn might reflect profit-taking behavior and speculated about a potential slowdown in the AI investment boom. He posed a critical question: Is the AI rally losing momentum?
A TSMC spokesperson confirmed that there had been no impact from the typhoon on the company’s operations as of Thursday.
Taiwan’s stock market was closed on Wednesday and Thursday due to Typhoon Gaemi, which also affected the Philippines. The last time Taipei experienced a two-day closure for a typhoon was in 2016.
On Friday, the Taiwanese dollar appreciated by up to 0.2% against the U.S. dollar, recovering slightly from earlier declines to its lowest level since 2016, which had been driven by intensified outflows from local equities.
