TSMC (TSM) shares tumbled by 13% on Monday as trading resumed after the Lunar New Year holiday, marking the steepest decline in nearly six months. The selloff was triggered by reports that DeepSeek’s low-cost AI model could rival leading U.S. developers, unsettling investors and igniting a global rout in AI-linked chip stocks.
The Taipei-listed shares slid as much as 6.6%, dragging down the benchmark Taiex by up to 4.4%. Major players such as Hon Hai Precision Industry and Inventec also recorded sharp losses—Hon Hai fell 9.2% and Inventec dropped as much as 8.5%—while escalating tariff tensions, spurred by President Trump’s duty hikes on Canada, Mexico, and China, further rattled the market.
Market Overview:- DeepSeek’s disruptive AI model has intensified the global selloff in chip stocks.
- TSMC’s decline, with intraday losses reaching 6.6%, pressured Taiwan’s benchmark index.
- Tariff fears and a strengthening greenback add to the volatility.
- TSMC shares tumbled 13% on the return from holiday trading.
- Hon Hai and Inventec experienced declines of 9.2% and 8.5% respectively.
- Investors are rebalancing portfolios amid concerns over an AI price war and tariff impacts.
- Fund managers may shift their focus toward non-Taiwan tech hardware for AI exposure.
- Long-term demand for AI inference chips could support TSMC’s growth trajectory.
- Ongoing geopolitical tensions and currency fluctuations remain significant risks.
- Despite the 6.6% decline in TSMC shares, the company remains a critical player in the global semiconductor industry, with cutting-edge technology and a strong position as a supplier to major clients like Apple and Nvidia.
- TSMC’s valuation, trading at approximately 18 times forward earnings, is attractive compared to competitors like Intel (32x) and Nvidia (27x), potentially drawing long-term investors seeking value in the semiconductor sector.
- DeepSeek’s cost-efficient AI model could foster greater adoption of AI technologies, driving increased demand for AI inference chips, which heavily rely on TSMC for manufacturing, thereby supporting long-term growth.
- Recent reports from companies like ASML and Advantest highlight robust demand for AI-related spending, which could bolster TSMC’s revenue as global AI adoption accelerates.
- TSMC’s advanced manufacturing capabilities and leadership in high-performance chip production position it to capitalize on future technological advancements, maintaining its competitive edge despite short-term volatility.
- The emergence of DeepSeek’s low-cost AI model raises concerns about the necessity of large-scale investments in high-performance chips, potentially reducing demand for TSMC’s advanced semiconductor products.
- TSMC faces significant geopolitical risks, including escalating tariff tensions under President Trump’s administration, which could disrupt its supply chain and impact profitability.
- The global selloff in AI-linked stocks has triggered investor skepticism about the sustainability of current valuations in the semiconductor sector, leading to potential foreign capital outflows from Taiwan’s tech-heavy market.
- TSMC’s reliance on major customers like Nvidia exposes it to risks from shifting market dynamics, as DeepSeek’s innovations may reduce dependency on high-end GPUs for AI development.
- Ongoing competition from Chinese semiconductor firms and alternative AI hardware solutions could erode TSMC’s market share over time, particularly if rivals achieve similar performance at lower costs.
Analysts remain divided on the long-term implications as TSMC’s cutting-edge technology and attractive valuation—trading at roughly 18 times forward earnings—offer a potential cushion against near-term volatility. While some point to robust demand for AI inference chips and supportive signals from industry peers, others caution that disruptive entrants like DeepSeek and mounting tariff pressures could accelerate foreign outflows from Taiwan.
Investors are closely monitoring these developments, with many re-evaluating their exposure amid a mix of technological disruption and geopolitical risks. The market’s ability to stabilize will hinge on TSMC’s performance in an increasingly competitive global semiconductor landscape.
