Jan 10, 2024

One of the world’s most important semiconductor producers will release earnings this week.


TSM – Daily Chart

TSM shares found support late in 2023 for another rally to $105. It now looks like $100 will be a crucial support level for another push higher, with lower support at $85. 

Taiwan is also important to the global economy because of its role in chip-making and geopolitics. 

A report from Bloomberg this week said any invasion of Taiwan by China could cost the global economy $10 trillion. Taiwan’s January 13 elections will be a potential flashpoint as China looks on. 

But only some expect a Chinese invasion as The People’s Liberation Army needs to concentrate troops along the coast. Corruption in the Chinese army cast doubt on President Xi Jinping’s ability to mount a campaign. At the same time, relations with Washington have eased recently. 

Taiwan produces most of the world’s advanced semiconductors and many chips. The total market capitalization of the 20 largest customers of Taiwan Semiconductor Company is about $7.4 trillion, while the Taiwan Strait is one of the busiest sea lanes in the world. 

The most significant blow would be a shortage of chips, which would hurt laptop, tablet, and smartphone production lines, where high-quality Taiwanese chips are indispensable. 

TSM should get a boost from end-of-year figures showing a boost in exports. On Tuesday, shipment from the island expanded 11.8% in December to US$39.94 billion, the Ministry of Finance in Taipei said. Exports ended a 13-month decline streak in September before sliding again in October. 

TSM will release earnings next Thursday, and investors could look for a dip in the stock to take advantage of the more robust export figures. That could lead to a boost in TSMC’s bottom line and also to management guidance. 

The Wall Street Journal also said this week that the Biden administration shifted its attention to less advanced computer chips in industries other than AI. That should ease some pressure on the chipmakers that export into China. 

TSM is also better valued than some of its peers, with a price/earnings ratio of 16 times, and it’s significantly cheaper than Intel at 26 times forward earnings. It is also half the valuation of AMD at 37 times forward earnings.

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