TSMC stock declines amid market strength
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Jul 18 2024
0mins
Should l Buy TSM?
Source: Coinmarketcap
Taiwan Semiconductor Manufacturing Co Ltd (TSMC) experienced a significant decline of 11.58%, hitting a 20-day low during regular trading hours. This drop occurred despite the broader market's positive performance, with the Nasdaq-100 up 1.76% and the S&P 500 up 1.14%.
The decline in TSMC's stock price can be attributed to sector rotation, as the semiconductor industry faces challenges despite overall market strength. Recent reports indicate that China is considering a substantial package of incentives worth up to $70 billion to bolster its domestic chipmaking industry, which may impact TSMC's competitive position in the global market.
This situation highlights the complexities within the semiconductor sector, where external factors such as government policies and market dynamics can significantly influence stock performance. Investors will need to monitor these developments closely as they could shape TSMC's future growth prospects.
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Analyst Views on TSM
Wall Street analysts forecast TSM stock price to fall over the next 12 months. According to Wall Street analysts, the average 1-year price target for TSM is 313.46 USD with a low forecast of 63.24 USD and a high forecast of 390.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
8 Analyst Rating
7 Buy
1 Hold
0 Sell
Strong Buy
Current: 330.730
Low
63.24
Averages
313.46
High
390.00
Current: 330.730
Low
63.24
Averages
313.46
High
390.00
About TSM
Taiwan Semiconductor Manufacturing Co Ltd is a Taiwan-based integrated circuit foundry service provider. The Company is primarily engaged in integrated circuit manufacturing services. It offers advanced process technologies, specialised process solutions, advanced photomask and silicon stacking, and packaging-related technologies, while supporting a comprehensive design ecosystem. The Company's products serve diverse electronic sectors including artificial intelligence, high-performance computing, wired and wireless communications, automotive and industrial equipment, personal computing, information applications, consumer electronics, smart internet of things, and wearable devices.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Significant Revenue Growth: TSMC's Q4 revenue reached $33.73 billion, reflecting a 25.5% year-over-year increase, demonstrating strong demand in the semiconductor market and reinforcing its leadership position.
- Strong Profit Margins: The company reported a profit margin of 48.3%, indicating its competitive advantage in high-end chip manufacturing, effectively controlling costs while achieving high returns.
- Advanced Process Technology: In 2023, over half of TSMC's revenue came from chips larger than 7nm, with significant increases in the production of 3nm and 5nm chips, as 3nm chips accounted for 28% of total shipments, showcasing ongoing investment in technological innovation.
- Robust Market Demand: With the rapid advancement of artificial intelligence technologies, TSMC is experiencing increasing customer demand, solidifying its status as the world's largest chip foundry and is expected to benefit from the growth in AI infrastructure investments.
See More
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- Market Growth Potential: According to Fortune Business Insights, the AI market is projected to grow from $375.9 billion this year to $2.48 trillion by 2034, representing a compound annual growth rate of 26.6%, which presents significant opportunities for related companies.
- TSMC's Industry Position: As the world's largest semiconductor foundry, TSMC produced over 11,800 products across 288 different processes in 2024, demonstrating its unparalleled influence and customer base in the industry.
- Strong Financial Performance: TSMC reported fourth-quarter revenue of $33.73 billion, a 25.5% increase year-over-year, with a profit margin of 48.3%, indicating robust profitability in a rapidly growing market.
- Technological Advancements and Market Demand: TSMC derived over half of its revenue from chips larger than 7 nanometers in 2023, but has significantly increased production of 3nm and 5nm chips, which now account for 28% and 35% of total shipments respectively, showcasing its agility in adapting to technological advancements and market demand shifts.
See More
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- Massive Market Potential: According to Bloomberg Intelligence, the total addressable market for AI accelerators is expected to grow at a 16% CAGR, reaching $604 billion by 2033, providing strong market support for Micron Technology.
- Surging Memory Demand: Micron dominates in high-bandwidth memory (HBM), dynamic random access memory (DRAM), and NAND chips, with forecasts indicating the memory market could grow to $100 billion by 2028, highlighting the accelerating demand for memory chips.
- Capital Expenditure Driving Price Increases: With big tech expected to spend over $500 billion on AI infrastructure, shortages in HBM solutions are anticipated, with TrendForce research suggesting DRAM and NAND prices could soar by 60% and 38%, respectively, in Q1 alone.
- Attractive Valuation: Micron currently trades at a forward P/E ratio of 12, significantly lower than other leaders in the AI chip market, and combined with the multi-year supercycle for HBM chips, this indicates strong investment potential for Micron stock.
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- Dow Index Milestone: The Dow Jones Industrial Average has surpassed 50,000 for the first time, marking a significant recovery in the U.S. stock market, reflecting increased investor confidence in economic recovery, which may lead to more capital inflows into equities.
- Buying Opportunities: Stocks like JPMorgan, Apple, and Boeing have entered buy zones, indicating that the performance of these large companies has attracted investor interest, potentially driving their stock prices higher and enhancing market vitality.
- Nasdaq Divergence: While the Nasdaq remains below key support levels, some AI-related stocks are reviving, indicating a potential rebound in tech stocks that may provide new investment opportunities for investors.
- Market Sentiment Improvement: The overall market sentiment is improving, as optimistic expectations for future economic growth may encourage more capital to flow into the stock market, thereby driving further increases in the overall market.
See More
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- Massive Market Potential: According to Bloomberg Intelligence, the total addressable market for AI accelerators is expected to grow at a 16% CAGR through 2033, reaching $604 billion, providing strong market support for Micron Technology.
- Surging Memory Demand: Micron's management forecasts that the memory market will grow from $35 billion in 2025 to $100 billion by 2028, indicating a much faster acceleration in demand for memory chips compared to the GPU market.
- Capex Driving Price Increases: Big tech is expected to spend over $500 billion on AI infrastructure this year, leading to shortages in high-bandwidth memory (HBM) solutions, with TrendForce research suggesting DRAM and NAND chip prices could soar by 60% and 38%, respectively, in Q1 alone.
- Significant Valuation Appeal: Micron currently trades at a forward P/E ratio of 12, significantly lower than other AI chip leaders, and combined with strong market trends, this gives investors confidence in its future performance.
See More
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- Dow Jones Milestone: The Dow Jones Industrial Average has surpassed 50,000 for the first time, indicating a significant boost in market confidence that could attract more investors and drive overall economic recovery.
- Key Stock Performance: Stocks like JPMorgan, Apple, and Boeing are now in buy zones, reflecting their strong fundamentals and market demand, which may further propel their stock prices and enhance investor confidence.
- Nasdaq Divergence: While the Nasdaq remains below key support levels, certain AI stocks are reviving, suggesting a renewed interest in tech stocks that could lay the groundwork for future growth.
- Improved Market Sentiment: The Dow's breakthrough not only reflects optimistic expectations for economic recovery but may also encourage other indices to follow suit, further enhancing overall market vitality and liquidity.
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