Why Is Taiwan Semiconductor (TSM) Stock Up Today?

  • Shares of Taiwan Semiconductor (TSM) are up nearly 7% in early afternoon trading.
  • TSM stock appears to be responding to encouraging earnings guidance from Samsung Electronics.
  • Recent developments suggest a sentiment pivot is coming though significant challenges remain.
TSM stock - Why Is Taiwan Semiconductor (TSM) Stock Up Today?

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In a sector suffering from deep losses and major concerns about future trajectories, Taiwan Semiconductor (NYSE:TSM) provided a much-needed sentiment boost. Shares rose nearly 7% in early afternoon trading on Thursday. Other chipmakers are likewise moving up strongly, suggesting TSM stock and the rest of the industry are responding positively to Samsung Electronics’ surprisingly robust earnings guidance.

For the upcoming second quarter of 2022, Samsung expects to ring up consolidated sales of 77 trillion Korean won, representing a nearly 21% gain over the company’s actual sales result of 63.67 trillion won in Q2 2021. Further, management anticipates consolidated operating profit of 14 trillion won, which would be up more than 11% against Q2 2021’s tally of 12.57 trillion won.

Prior to the sudden shift in tone, analysts regarded the semiconductor space with trepidation. One of the biggest headwinds throughout the coronavirus-fueled new normal has been the global supply chain disruption. Unable to effectively feed every industry’s fulfillment requests, pent-up demand created lumpiness in supply flows.

Brewing Confidence Boosts TSM Stock

Primarily, Wall Street pays close attention to TSM stock because the underlying company is the world’s largest dedicated independent semiconductor foundry, or fab. These specialists essentially design chips for other companies and TSMC in particular forms the backbone of our digitalized economy.

Among Taiwan Semiconductor’s biggest customers are Apple (NASDAQ:AAPL), MediaTek, Advanced Micro Devices (NASDAQ:AMD) and Qualcomm (NASDAQ:QCOM). In other words, good news for TSM stock fundamentally translates to encouraging downwind benefits.

Further, Samsung’s positive earnings guidance disclosure couldn’t come at a better time. While the prior two years may have focused on supply chain disruptions, this year is all about inflation and the impact the subsequent decline in purchasing power has for consumer sentiment. With a major consumer electronics firm forecasting higher sales, it suggests global consumers are more resilient than initially thought.

Trouble Spots Remain

Despite the heartening buoyancy of TSM stock, investors need to tread very carefully moving forward. For instance, certain semiconductor clients like AMD are tied to presently flailing sectors, perhaps most notably cryptocurrencies. Also, consumer electronics represent easy items to cut from personal budgets if a severe recession hits the economy.

Nevertheless, the aggressive move higher for TSM stock implies that analysts may have been too bearish on the chipmaking sector. Therefore, this market segment may open doors for battle-hardened speculators.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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