TSMC’s 13% Rout May Have Further to Go, Options Traders Indicate

(Bloomberg) -- Taiwan Semiconductor Manufacturing Co. options traders are contending with a rising wave of bearishness following the chipmaker’s cautious guidance and concerns about whether the artificial-intelligence trade is unwinding.

Most Read from Bloomberg

• Biden’s Gains Against Trump Vanish on Deep Economic Pessimism, Poll Shows

• Taylor Swift Is Proof That How We Critique Music Is Broken

• Zuckerberg Asks for Patience After Meta’s AI Push Irks Investors

• Tech Giants Hit in Late Hours After Meta’s Outlook: Markets Wrap

• Biden’s New Chopper Is Demoted After Scorching White House Lawn

The volume of put options on the chipmaker’s US-listed shares climbed to the highest level since January on Friday, according to Bloomberg-compiled data. TSMC shares have dropped 13% over the past six sessions, erasing more than $100 billion in market value.

The world’s largest maker of advanced chips cut its expectations for 2024 semiconductor market growth — excluding memory chips — to about 10% last week. That added to a spate of cautious news for a sector that’s been flying high over the past year as enthusiasm about AI swelled, with some seeing the gains as overdone. Nvidia Corp and Super Micro Computer Inc., two other sector darlings, plummeted on Friday.

While put options have been on the increase, call options have also seen elevated activity, suggesting some traders see potential for a rebound. Open interest for both put and call options on Friday was each about 20% higher than their 20-day average levels.

Cautious capital spending and industry outlook have depressed sentiment for TSMC, Morningstar analyst Phelix Lee wrote in a note Friday. However, he added that the “shares remain attractive, as artificial intelligence-related demand continues to pleasantly surprise us, and there is limited downside to sentiment for the automotive and industrial markets.”

--With assistance from John Cheng.

Most Read from Bloomberg Businessweek

• A Hedge Fund Billionaire’s Cash Helped Fund a ‘Predatory’ Lender

• Big Junk Food’s Campaign to Get You Eating Doritos and Oreos for Dinner

• How a Massive Hack of Psychotherapy Records Revealed a Nation’s Secrets

• Studio Behind Dune Eyes Growth, Even Without a Paramount Merger

• China’s Bubble Tea Boom Creates a Half-Dozen Billionaires

©2024 Bloomberg L.P.