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Taiwan Semiconductor Manufacturing (TSMC) experienced notable sell-offs during Wednesday’s trading, with its stock price dropping by 3.6% by the end of the day after initially falling 5.6% during the session. This downturn coincided with declines in major indices, as the S&P 500 fell by 2.2% and the Nasdaq Composite dropped 3.1%.
The decline in TSMC’s market valuation can be attributed to several factors, including recent export restrictions on Nvidia processors, increased tariffs on China, and cautious remarks from Federal Reserve Chairman Jerome Powell. With these developments, TSMC shares have now decreased by 23% since the beginning of the year.
TSMC Stock Declines Due to Multiple Negative Influences
Nvidia revealed a major business challenge in a recent filing, stating that it will now be required to obtain an export license to sell its H20 processors to China. This restriction suggests that Nvidia may ultimately be unable to market these products in that region.
As the manufacturer of these chip designs, TSMC could face a reduction in overall demand resulting from restrictions on advanced artificial intelligence (AI) semiconductors aimed at the Chinese market.
Additionally, TSMC’s stock was pressured by news of an increase in U.S. tariffs on China, which are set to rise to 245%. Powell’s comments regarding the Fed’s approach to interest rates amid these new tariffs further fueled investor apprehension, indicating that rate cuts would be delayed until the inflationary effects of these tariffs are better understood.
Future Outlook for TSMC
In a report by DigiTimes, it was noted that TSMC plans to increase prices on its 4nm chips by 30% due to heightened demand. This price increase suggests that the company could continue to see robust sales growth in the near future. However, significant risks loom on the horizon. TSMC is positioned to be a key player in the production of advanced chips for AI applications going forward, but its role amid rising U.S.-China tensions adds considerable geopolitical risk to the company’s stock.
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