TSMC forecast lifts gloomy mood in chip stocks, tariff worries linger

By Ankur Banerjee

SINGAPORE (Reuters) -Taiwan's TSMC on Thursday lifted some share prices in Asia and Europe amid U.S. President Donald Trump's fast-evolving trade policies by providing an upbeat forecast, a day after warnings from Nvidia and ASML rocked chip stocks.

Taiwan Semiconductor Manufacturing Co, whose customers include Apple and Nvidia, reported better-than-expected quarterly profit on Thursday and maintained its full-year outlooks for both revenue and capital spending.

Shares of Japanese tech companies and some European firms rose after the TSMC results, which were announced after Taiwan stock markets closed. The firm's Frankfurt-listed shares was up 5.5% in early trading.

On Wednesday, chip stocks were battered as Nvidia warned of a $5.5 billion hit after Washington restricted exports of its AI processor tailored for China, while Dutch giant ASML raised doubts about its outlook.

TMSC executives said that although they understood there were risks from U.S. tariffs, the company has not seen any change in customer behaviour and expected its business to be supported by robust artificial intelligence demand.

The company, which is the world's largest contract chipmaker, is the main producer of advanced chips used in artificial intelligence applications and has been boosted by strong demand.

Gary Tan, a portfolio manager at Allspring Global Investments, said TSMC is in the strongest position to pass on price increases.

"That will be a proxy that you can work down the supply chain," said Tan, whose fund owns TSMC stocks but is underweight on Taiwan.

The bullish outlook from the bellwether for the global chip industry could help alleviate some investor concerns about chipmakers but the overall outlook for the sector remains cloudy and will be in focus through earnings season.

"Managements are going to be cautious simply because there's so much uncertainty, but also it's a little bit of get-out-of-jail-free card," said Mark Hackett, chief market strategist at Nationwide in Philadelphia.

"If they're nervous about a lot of other things, they can just blame it on the tariff policies and say that there's too much uncertainty and we're not going to give you guidance."

The threat of tariffs has weighed on TSMC stock. The Taipei-listed shares of TSMC are down more than 20% so far in 2025 in its worst start to the year in at least three decades as foreign investors flee. Its U.S. listed shares are down 23%.

Foreign investors have sold $8.66 billion worth of TSMC shares so far this year after buying $2 billion last year and $10.4 billion in 2023, Goldman Sachs said in a report.

TAIWAN RISKS

The exodus of foreign investors from TSMC and Taiwan stocks through the year underscores the wavering sentiment as traders grapple with Trump's fast-evolving trade policies.

Taiwan had been due to be hit with a 32% tariff by U.S. President Donald Trump, until he put all tariffs other than those on Chinese goods on hold for talks to take place. Taiwan and the United States on Friday held their first direct talks about the tariffs.

TSMC, which announced last month an extra $100 billion investment in the United States, is central to the U.S. chip industry, and bringing more of its production to U.S. soil would solve a major supply chain risk for customers that also include Qualcomm and Advanced Micro Devices.

Sam Konrad, investment manager for Asian equities at Jupiter Asset Management, said any geopolitical issues with Taiwan would create an extremely big problem for the U.S. tech companies that rely on the Taiwanese companies.

"So we don't think the Taiwan risk is priced into U.S. tech valuations, but we think it is priced into Taiwanese tech valuations," Konrad said.

(Reporting by Ankur Banerjee in Singapore; additional reporting by Purvi Agarwal. Editing by Gerry Doyle)