TSMC’s Forecasted Share Price Drop Is Bad News

Q3 Broke Records, But The Future Could Be Dark

TSMC has had a brilliant year so far, as just about every single chip slinger is using their fabs to produce at least some of their silicon, up to and including Intel.  They made US$8.79 billion in Q3 which brings their year-to-date up to US$20.23 billion, exceeding experts predictions by a fair margin.  This has done nice things to their stock prices but unfortunately it may not last.

Investment companies like Goldman Sachs and several banks have downgraded TSMC ‘s forecasted share price, with some taking the company off of their list of top picks.  There are several reasons for this and none of them are good for enthusiasts.  The biggest reason is that TSMC themselves are cutting back on capital investment in new manufacturing capacity for the first time in several years.

TSMC made that choice because of the news we have talked about over the past few months, and will be again soon.  NVIDIA missed targets by over $1 billion USD while Intel missed theirs by over $2 billion and that trend is likely to continue.  The entire PC industry shrunk more than it has in about two decades, with sales shrinking by 20% compared to this time last year, and Q3 of last year was not great to begin with.

Seeing as how people are buying less computers and components, Intel, AMD, NVIDIA and others have no choice but to reduce the amount of product they make and that means TSMC will have less business.   While we did expect a decline, the extent to which TSMC’s stock is being downgraded suggests the shrinkage may be greater than we feared.  Let’s hope it is just an over reaction!