Will Demand Improve in the Chip Sector?

Shares of Taiwan Semiconductor Manufacturing Co (TSM), the world’s largest contract chipmaker, have fallen more than -10% since posting a 6-month high in June as weakness in demand and elevated inventories plague the chip sector.  The stock is also under pressure from soft global consumer electronics demand and the recent jump in global interest rates that have raised concerns about the macro environment.   

Taiwan Semiconductor Manufacturing Co (TSMC) jumped 60% from last October to June due to the frenzy over everything related to artificial intelligence (AI).  However, investors have become more wary about how much AI will contribute to the company’s bottom line, especially without a pickup in the smartphone and personal computer business.  Also, high-end AI chip orders have slowed more quickly than expected. JPMorgan Chase believes this means a slower recovery going into 2024, saying, “With a murky macro-outlook, we expect first-half orders for 2024 to remain sluggish.”