Taiwan Semiconductor Manufacturing Co. (TSMC) is grappling with financial challenges as investor concern over a prolonged slump in the chip sector intensifies. The unease has triggered a 10% drop in TSMC's shares since June, erasing $72 billion from its market capitalization.
Earlier, the company's shares had seen a 60% surge between October and June, spurred by worldwide interest in artificial intelligence (AI). Despite this, a decline in AI chip orders, an uptick in bearish contract trading, and sluggish global consumer electronics demand have cast a shadow over TSMC's future profitability.
Analysts from JPMorgan Chase & Co. (NYSE: JPM ) forecast a sluggish recovery for TSMC until 2024 due to tepid demand in both AI and non-AI services markets. The company's projections for capital spending, which range from $32 to $36 billion according to Bloomberg-compiled estimates, have raised concerns over potential cutbacks. This comes as the company continues to navigate through the choppy waters of a sustained downturn in the chip sector.
In conclusion, TSMC's performance is a mixed bag. While the company has demonstrated financial strength and stability, the current slump in the chip sector and the decline in AI chip orders pose significant challenges. Investors will be closely watching the company's strategies to navigate these headwinds.
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