TSMC Rakes in Massive Profits, But Trump’s Shocking Comments Cause Stock Crash

TSMC’s strong results are overshadowed by a 4% drop in stock price after Donald Trump made controversial comments about Taiwan’s chip dominance, even though the company is expecting a 30% increase in profits for the second quarter.

The biggest maker of chips used in artificial intelligence (AI) applications, TSMC, is likely to report another strong quarter of earnings on Thursday. However, Donald Trump’s comments about Taiwan caused its Taipei shares to drop 4%.

The Taiwan market and TSMC stock prices have both reached all-time highs. Trump, the Republican candidate for president of the United States, said on Wednesday that Taiwan “took about 100% of our chip business” and should pay for our security.

But TSMC is likely to report a 30% jump in second-quarter profit later on Thursday, even though its American Depository Receipts fell 8% on Wednesday. Taiwan’s stock market (.TWII), which starts in a new tab, was down 2% in the early going on Thursday.

James Huang, head of Taipei-based Franklin Templeton SinoAm Securities Investment Management, said that Trump’s comments might have an effect on politics but won’t change the fundamentals of the market. In recent years, more and more people are using AI. This has been good for Taiwan Semiconductor Manufacturing Co (TSMC), which makes chips for companies like Apple and Nvidia.

A group of 21 analysts who work for LSEG SmartEstimate say that TSMC will have a net profit of T$238.8 billion ($7.33 billion) for the quarter that finished on June 30. SmartEstimates give more weight to predictions made by analysts who are better at making predictions every time.

Last week, TSMC recorded a rise in second-quarter revenue in Taiwanese dollars, which was much higher than what the market expected. It will give sales projections for the third quarter in U.S. dollars. Yesterday, shares in ASML, which is the biggest supplier of equipment used to make computer chips and a big customer of TSMC, dropped sharply. This was because of fears that the U.S. government could put more limits on ASML’s exports to China.

TSMC’s Quarterly Plans and Capital Expenditure Focus

During its quarterly results call on Thursday at 6:00 GMT, TSMC will talk about its plans for the current quarter and the whole year, including how much it plans to spend on capital equipment as it rushes to increase production.

Although TSMC has said that most of its manufacturing will stay in Taiwan, it is spending billions of dollars on new factories abroad. For example, $65 billion was spent on three plants in the U.S. state of Arizona.TSMC made the same prediction on its April earnings call that capital spending would stay between $28 billion and $32 billion this year, down from $30.45 billion last year. The company said that 70% to 80% of the total would go towards new technologies.

Asian tech companies usually have their busiest times in the second half of the year, as they try to meet customer needs before the holidays in the West. The rise in AI has helped drive up the price of shares in TSMC, which is Asia’s most valuable publicly traded business. TSMC’s Taipei-listed stock has risen 68% so far this year, while the market as a whole has only gained 30%.