Why Taiwan Semiconductor Stock Was Pulling Back Today

Shares of TSMC pulled back after growth slowed in August.

| More on:
taiwan semiconductor tsmc fabrication of semiconductor chip wafers_tsmc

Source: Taiwan Semiconductor

Shares of Taiwan Semiconductor (NYSE: TSM) were moving lower today after the chip manufacturing giant posted slowing revenue growth in its August update.

Though its growth rate was still strong, it marked a deceleration from July, and that news was enough to push the stock lower.

At 10:45 a.m. ET, the stock was down 2.6%. It recovered some in intraday trading and was down 1.5% for the day as of 1:25 p.m. ET.

TSMC hits the brakes

Taiwan Semiconductor has been one of the biggest beneficiaries of the artificial intelligence (AI) boom thus far, as the company is the world’s biggest contract chip manufacturer, serving customers like Apple, Nvidia, Broadcom, and AMD. For that reason, its performance is closely watched as a bellwether for AI and the broader semiconductor industry.

For August, the company reported revenue of $7.8 billion, up 33% from a year ago but down 2.4% from July’s total. Year to date through August, revenue is now up 31% to $55.1 billion, meaning August growth was mostly consistent with the rest of the year.

Management does not provide any commentary on the monthly reports, but not only was revenue down sequentially, but the growth rate, while still strong, was a meaningful deceleration from 45% in July.

Should investors be worried?

Most companies don’t report monthly data because the numbers are often volatile and not reflective of underlying business trends. The August slowdown at TSMC could certainly be just a blip rather than a trend.

The update is no reason to be alarmed at this point, but it is worth keeping tabs on the company’s monthly revenue reports, especially as some investors are worried about a bubble in AI.

If TSMC reports another deceleration in September, it could be some cause for concern, but investors should also remember that generative AI will take years to play out.

Therefore, under those circumstances, a modest sell-off in TSMC stock seems fair, but the report is no reason to change your thesis on the stock.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Jeremy Bowman has positions in Broadcom. The Motley Fool recommends Advanced Micro Devices, Apple, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.

More on Tech Stocks

GettyImages-1352607170 (1)
Tech Stocks

Why Shopify Stock Is Skyrocketing Today

Shopify published its Q3 report this morning, and it gave investors plenty to be excited about.

Read more »

young people stare at smartphones
Tech Stocks

Here Are My Top 3 Tech Stocks to Buy Now

Given their strong performances and healthy growth prospects, I expect these three tech stocks to deliver superior returns over the…

Read more »

artificial intelligence AI data deep processing
Tech Stocks

Top 3 Canadian AI Stocks to Watch This Year

When there is as much hype about a specific type of stock (like AI stocks), it's a good idea to…

Read more »

ETF stands for Exchange Traded Fund
Tech Stocks

The Best Tech ETF to Invest $1,000 in Right Now

An ETF can be a solid option for any type of investing. But with tech stocks having a lot of…

Read more »

how to save money
Tech Stocks

Should You Buy Shopify Stock Hand Over Fist Before November 12?

Here are the top reasons why you may want to consider buying Shopify stock before its upcoming earnings event.

Read more »

stocks climbing green bull market
Tech Stocks

Why Propel Stock Keeps Going Up

Propel stock has seen a fivefold increase in its market cap in the last year! But even more is set…

Read more »

a-developer-typing-lines-of-ai-code-while-viewing-multiple-computer-monitors
Tech Stocks

Could Constellation Software Become the Next Berkshire Hathaway?

Constellation Software's (TSX:CSU) capital-allocation strategy is similar to that of Berkshire Hathaway (NYSE:BRK.B).

Read more »

cloud computing
Tech Stocks

3 No-Brainer Tech Stocks to Buy With $1,000 Right Now

These three Canadian tech stocks could be among the best growth opportunities in the market right now.

Read more »