Selling pressure across the semiconductor sector weighed on TSMC.
Taiwan Semiconductor Manufacturing Co., Ltd. (TSM -6.53%) TSMC shares fell today as weak momentum across the semiconductor industry weighed on the stock, along with news from Japan that reminded TSMC of a familiar villain.
As of 12:18 p.m. ET, the company’s shares were up 5.8%, while the Nasdaq Composite Index was down 2.3%, signaling a broader market decline.
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Semiconductor stocks remain volatile
Semiconductor stocks like Taiwan Semiconductor tend to follow Nvidia’s lead, and the artificial intelligence (AI) chip giant’s shares fell sharply today despite there being no major company-specific news for the stock.
If anything, investors appear to be questioning the sector’s valuation after Nvidia’s second-quarter earnings report last week, which beat expectations but missed forecasts.
Taiwan Semiconductor is sensitive to broader demand for semiconductors and AI components, so any impression that demand for new technologies will meet expectations will weigh on the stock.
Additionally, Japan and China are currently at odds over semiconductor export controls, which may be spooking some investors as military threats from Beijing are seen as one of the biggest long-term risks to TSMC shares.
The United States is pressuring Japan to further restrict exports of advanced semiconductor-making technology to China, and Beijing is now threatening economic retaliation, including withholding rare earth metals and other minerals needed for technologies like auto production.
Should I buy TSMC?
While Beijing remains a risk for TSMC, the manufacturing giant looks like one of the safest stocks in the industry, as demand for the company’s services will likely never go away no matter who wins the AI race.
The company’s recent performance has also been strong: Revenue increased 45% in July, and the company is due to report August results soon.
Right now, TSMC looks like a good candidate to buy on the dip: Its business is growing rapidly, its valuation is reasonable, and it has significant competitive advantages.
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool owns shares in and recommends Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
