TSMC shares react negatively despite guidance beat: Consolidation in AI trade likely; component shortage, price hikes and earnings upside still next catalysts

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TSMC shares react negatively despite guidance beat: Consolidation in AI trade likely; component shortage, price hikes and earnings upside still next catalysts

COVID-19 cycle peak could materialize in 1H22: “Pricehikes

continue;cyclerisksbeyond1Q22” Oct 2021, “2022:Likelyastrongbeginning,butsoft

ending” Dec 2021, “Cyclepeakishere” April 2022, “Cyclepeakishere–partII” June

2022. From Fig.2, we could infer that the share price of TSMC consolidated through

2021, and then started falling in 2022.

Our reading of the July 2024 correction was however different. The share price correction

appeared to be a false alarm, suggesting a cycle peak but later on it was overridden by

the AI-driven uptrend. By the time TSMC raised its guidance in July 2024,

TSMC/SOX/TWOTCELE had appreciated by a “significant” 105%/92%/59% following the

launch of ChatGPT3.5 – or as Jensen Huang in Feb 2023 claimed, AI’s “iPhone moment,”

news). And in our May 2024 semiconductor strategy report (“It’sallaboutAI”), we had

flagged elevated sector valuation and AI transition risk heading into 2H24 (from Hopper to

Blackwell) before the rally in 2025. From Fig.2-Fig.4, we can see TSMC/SOX/OTCELE

had corrected in 3Q24 and then climbed back up in 4Q24.

So, where are we now? In variance with conventional cycle wisdom, we expect the AI

trade to re-emerge after the recent consolidation/weakness. We expand coverage of

advanced semiconductor testing supply chain where we highlight four new Buy ideas

In our latest AI semi and server Anchor Report (“Isthecycleover?” June 2026),” we had

highlighted several reasons that could drive a share price correction, such as a lack of

visibility into 2028 new data center builds, US hyperscalers facing 2027 FCF pressure, the