inflation fears hit TSMC and NVIDIA shares
Taipei, Wednesday, 8 January 2025.
Shares of TSMC and NVIDIA have seen declines due to ongoing concerns about high inflation in the US. TSMC’s stock in Taipei fell by 2%, while its American Depositary Receipts (ADRs) dropped 4%. NVIDIA’s stock also experienced a notable drop, impacting overall market sentiment. The decline underscores the broader economic worries affecting key players in the semiconductor industry. Investors are cautious about the Federal Reserve’s interest rate policies amid persistent inflation. TSMC’s upcoming earnings call on 16 January 2025 is anticipated to shed light on its performance and outlook, especially in advanced chip manufacturing. Analysts remain optimistic about TSMC’s long-term prospects, bolstered by the AI market’s strength. However, short-term pressures from economic conditions continue to weigh heavily on tech stocks, reflecting a complex financial landscape as the new year unfolds.
Market reaction and stock performance
TSMC’s stock experienced significant pressure as its ADR fell 4% to $211.42 [1][7], while its Taipei-listed shares dropped 25 TWD or 2% to close at 1,105 TWD [1]. NVIDIA shares declined more dramatically, falling over 6% [1][6]. The semiconductor sector broadly felt the impact, with the Philadelphia Semiconductor Index dropping 1.8% [7]. These movements reflect heightened investor concerns about persistent U.S. inflation affecting the tech sector.
Analyst outlook remains positive
Despite market volatility, Goldman Sachs analyst Bruce Lu maintains a buy rating on TSMC’s ADR, raising the price target from $248 to $254 [1]. The upcoming January 16 earnings call is expected to showcase strong momentum in advanced processing technologies, with 26.8% of revenue driven by AI-related demand [1]. Investment in AI data centers has exceeded initial projections by 213 billion USD [1].
Market leadership and competitive dynamics
The semiconductor industry is witnessing an intensifying AI arms race, with major cloud service providers like Amazon, Google, and Meta expected to maintain aggressive investment strategies [1]. This competitive dynamic positions TSMC favorably as the leading semiconductor manufacturer. However, analysts caution about potential market volatility ahead of the extended Lunar New Year holiday trading closure on January 22 [1].