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TSMC stock slides on industry caution from management

Shares of Taiwan Semiconductor Manufacturing Company (TSM) are falling after the company posted its first quarter earnings. While the company posted a net profit of $6.97 billion, beating Wall Street expectations, company leadership cut its forecast for the overall market growth, excluding memory chips, in 2024 down to 10%.

Yahoo Finance Anchors Julie Hyman and Myles Udland break down why TSMC's results are rattling the chip space.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Nicholas Jacobino

Video transcript

MYLES UDLAND: We wanted something good to happen at the start. And it just wasn't there. Of course, the pressure from chips today really around what we saw from Taiwan Semiconductor.

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Company comes out early this morning really in the overnight hours. They report better than expected results. But cautioning a little bit just on the overall environment.

In a way, Julie, the call here from TSM is them saying, well, we might not be able to meet all the demand, which on the one hand is good. But I think the reaction to this news, the reaction we saw from ASML yesterday, which comes out and misses their expectations. It's in Wall Street parlance a real show me situation where expectations have gotten so high.

The run up in the stock prices has also been so considerable for a number of these names. That you can't come out and say, yes, we beat numbers. But we're not 100% sure everything is quite as amazing as all investors think looking forward. And with this market, I know we're going to talk about this in a second. But with the market just in general acting worse, it's not really the kind of environment where you can be not even wishy-washy, but just anything less than effusive about the outlook, especially when you are a pure play, or within that pure play chip demand AI play.

There's no questions about what's been the bull case for Taiwan Semiconductor and to even have a single shred of maybe it won't be quite as amazing as all you guys on the street thought. You see the action today.

JULIE HYMAN: Yeah, and as we talked about with ASML, so much is riding on these tech companies delivering when it comes to earnings. Because we are still so reliant on them for the overall market to go higher. So you can see on a day like this how stocks overall struggle to gain when something like a Taiwan Semi has that ripple effect that then affects the other chip makers.

I mean, that said, what Taiwan Semi said today was pretty nuanced. A lot of the weakness last quarter came from autos, which is not surprising, given what we know about autos. And the company also said that the overall industry is going to be about 10% this year, grow 10% this year, x memory chips Before their forecast had been above 10%. So it's not that different. But it's different enough.

MYLES UDLAND: Well, and I think because it's second quarter or first quarter earnings season. It's not that endless kind of fourth quarter beginning of the year. All this is going to happen in the next couple of weeks. And to your point about they had a nuanced call. Maybe it's not the quarter for nuance. Maybe it's not going to be one of those periods when nuance gets you out of jail. Maybe it's going to be better come and you better bring the goods.