Taiwan Semiconductor Stock Rise Continues After Berkshire Hathaway Announces $4.1 Billion Stake

The world’s largest contract chipmaker or foundry, Taiwan Semiconductor Manufacturing shares rose 6% after hours following Warren Buffett’s Berkshire Hathaway announced they bought more than US$4.1 billion of American Depository Shares (ADS) in TSMC in their filing for September 30. TSMC have been a big part of the Semiconductor bounce in the past week rising 12.96% tracking the broader tech rally after the mellower US inflation print prompted bets of a less aggressive hike by the Federal Reserve.

Berkshire Hathaway stake is equal to a 1.16% stake in the company’s ADS share float of 5.19 billion. The latest numbers from $TSM showed a 56% jump in October sales, signaling that the world’s largest contract chipmaker is continuing to weather a slowdown in electronics demand.

Prior to the recent rally shares of Taiwan Semiconductor Manufacturing fell 7.6% in October, in contrast with the broader S&P 500 index, which was up 8% during the month.

TSMC Earnings and Headwinds

Taiwan Semiconductor despite reported better than expected earnings faced multiple headwinds. TSMC management warned that some of its end markets were softening. Further the U.S. government doubled down on restrictions of advanced chips to China, some of which had been announced earlier this summer. The move hurt sentiment on all the semiconductor companies involved in leading-edge chip production.

On its third-quarter conference call in October, management called the effect of the ban “limited and manageable.” Taiwan Semi reported better-than-expected revenue and earnings in the third quarter, with revenue up 35.9% over the prior year, and operating margin expanding by a whopping 9.4 percentage points.

The outlook prompted selling in the stock after management guided for only flattish quarter-to-quarter revenue in the fourth quarter, despite its leading competitive position. The headwinds of the semiconductor cyclical slowdown counteracting high demand for TSM’s industry-leading 5 nm technologies. Management also said it would lower capital expenditures this year, lowering its spending relative to prior forecasts, which hinted at a further slowdown in the year ahead.

There is also the elephant in the room, China’s constant saber-rattling regarding Taiwan. At the China National People’s Congress in October President Xi Jinping stacked the new Politburo with loyalists, who tend to be hawks regarding “reunifying” with Taiwan.

About Taiwan Semiconductors

Taiwan Semiconductor Manufacturing Co., Ltd. (TSMC) is the largest semiconductor manufacturing company in Taiwan and World. It is the manufacture of integrated circuits and related services with revenue of $US47.85 billion.

Semiconductors are the main component in all modern electronics, and are therefore a critically important segment of the global economy. Taiwan is a significant supplier not only to leading U.S. technology firms like Apple, Texas Instruments, and Qualcomm, but also to U.S. allies globally.

From The Traders Community News Desk