TSMC shares tumble as Democratic sweep rattles chip stocks

Taiwan Semiconductor Manufacturing's ↘ 9.11% U.S.-listed shares fell close to 10% in morning trading on Thursday, Nov. 5. Investors sold chip stocks after Democrats swept the U.S. midterm elections, which they read as a threat to the AI data center buildout that drives demand for the company's chips.investing.com

The selling spread across the sector. Bloomberg reported that the Philadelphia Semiconductor Index PHLX Semiconductor Index ↘ 9.71% was on pace for its worst day since June. The index was down about 12% for the week and heading for a fifth straight weekly loss. Micron Technology ↘ 13.16% dropped more than 12%, Advanced Micro Devices ↘ 14.79% lost over 13% and Nvidia ↘ 7.81% fell more than 6%.bloomberg.com+1

Data center fears

Democrats won both chambers of Congress in the Nov. 3 election, along with key governorships. Investors worry this could mean tougher scrutiny of data centers at a time when public opposition to new facilities is already growing. Several winning candidates have pledged to slow or stop data center construction. Texas, Ohio, Michigan and Georgia are of particular concern because they are large data center markets. UBS strategists estimated that around 30% of the data center capacity expected to be added in 2028 could be disrupted by construction pauses.reuters.com+2

Evercore ISI warned that "a more restrictive data center development environment could create incrementally more negative sentiment for AI infrastructure exposed names". Weak quarterly results from Qualcomm ↘ 11.17% and Arm Holdings ↘ 11.64% added to the pressure.nbcnews.com+1

The sell-off erased the gains from Wednesday's post-election rally. Chip stocks had already lagged on Wednesday. That day the semiconductor index closed down 3.13% while the Dow Jones Industrial Average jumped more than 1,500 points.finance.biggo.com+1

Taiwan market slides

In Taipei, the Taiex fell 3.2% on Thursday to close at 41,574.72, its lowest level since July 31. Foreign investors sold a net NT$102.46 billion of shares, the 10th-largest one-day net sale on record. TSMC's local shares held up better than the market and closed down 0.88%. MediaTek fell 6.86%, and several makers of cooling systems and printed circuit boards dropped by the 10% daily limit.focustaiwan.tw

Some analysts expect the chip industry's fundamentals to hold up. On the same day, Bernstein raised its TSMC price target to $600, citing demand for custom chips from Amazon Amazon.com, Inc. ↘ 1.67% and Google Alphabet Inc. ↘ 1.02%. Tony Huang of Taishin Securities Investment Advisory said that while data center deployment could be delayed, "demand for related components remains intact". Investors are now waiting for TSMC's monthly sales report on Nov. 10.investing.com+1