TSMC Rebounds as Earnings Stem Semis Rout

TSMC's US-listed shares bounced almost 4% off their lows on Thursday as record results and upbeat demand comments helped stem a sharp sell-off in chip stocks.

The stock had dropped to a two-month low near $407 shortly after the open, taking its slide from the early-October peak to more than 16%. Buyers stepped in at a key support zone, and while the shares still closed 1.8% lower, the recovery from the lows suggested the selling pressure was starting to fade.

Latest Market Moves

• TSMC's US shares fell as much as 5.3% to around $407 on Thursday before recovering to close 1.8% lower at $422.25, and were holding near $422 in overnight trade on Friday.

• The Philadelphia Semiconductor Index fell 0.9% on Thursday, its seventh straight daily loss, having been down more than 4% at the session low.

• The Dow Jones Industrial Average jumped 1.1% to close at 52,177.69 on Thursday, outpacing a 0.3% gain for the S&P 500 and a flat finish for the Nasdaq Composite.

• The Taiex rose 0.6% on Friday, although TSMC's Taipei-listed shares slipped 0.4%.

Record Profits and Bigger Guidance

TSMC posted its sixth straight quarter of record profit, with net income up 68.7% on a year earlier.

Revenue rose to $46.7 billion, up 16.2% on the previous quarter and above the top end of the company's own guidance. TSMC guided fourth-quarter revenue to $52.3-54.3 billion, a 58% jump on a year earlier, and lifted its full-year growth outlook to around 44% in dollar terms.

Margins were the one soft spot, with gross margin slipping to 66.4% from 67.7% in the second quarter as the cost of new overseas fabs weighed. Fourth-quarter guidance of 65-67% helps explain why the shares opened lower despite the headline beat.

Demand Still Outruns Capacity

The bigger story for chip investors was what management said about demand.

"Demand is extremely robust. We did not see any sign of slowdown," CEO C.C. Wei said on the earnings call, adding that "the gap between demand and supply are still quite big." Asked whether TSMC would raise its forecast for AI accelerator growth, Wei said it "probably will be higher."

TSMC kept its 2026 capital spending budget at $60-64 billion and said spending from 2026 to 2028 would be significantly higher than over the past three years. With high-performance computing now 68% of revenue, those comments are a direct read on AI chip demand heading into next year.

Sentiment Turns as the Dow Jumps

The rebound came as the wider market found its feet, with the Dow gaining more than 1% on Thursday.

Wall Street opened lower after US producer prices rose 6.3% in the year to September, well above forecasts of 5.4%, following Wednesday's hot CPI report. Stocks recovered through the session as Treasury yields eased, with the 10-year yield slipping to around 5.09%.

Healthcare, materials and financials led the gains, while tech lagged, with Nvidia down 1.8% and AMD down 1.5%. Still, AI cloud provider CoreWeave swung from a 9.5% drop to a 5.9% gain after comments from Nvidia CEO Jensen Huang, a sign that dip buyers were returning to the AI trade.

TSMC Bounces at Trendline Support

On the daily chart, Thursday's low landed right on a confluence of support around $405.

That zone combines the August and September lows with a rising trendline drawn from the April low near $312 through the late-July low around $370. The long lower wick on Thursday's candle shows buyers defended the area firmly.

RSI has dropped from overbought territory above 70 at the start of October to around 37, so the stock is no longer stretched, though not yet oversold. A daily close below $405 would break both the horizontal support and the trendline, opening the way towards $370, while bulls would need a move back above $445 and then $480 to regain momentum.

Source: SpreadEx | TSMC, Daily Chart