Ukraine Invasion Sends Chill Through TSMC Shares

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Taiwan Semiconductor Manufacturing

shares dropped Thursday as traders worried about Taiwan-China relations in the wake of Russia’s invasion of Ukraine. The chipmaker’s drop was in contrast to gains for the broader semiconductor sector.

TSMC stock (ticker: TSM) fell 3.5% to close at $111.88 on Thursday, trading as low as $104.38 earlier in the session. Shares of Taiwan-based

United Microelectronics

(UMC) fell 1.8% to close at $9.24. The

PHLX Semiconductor Index,
known as the Sox, was up 3.5%.

GlobalFoundries

stock (GFS) jumped 14% to $54.80, while

Intel

stock (INTC) was up 4.6% to $46.72.

Advanced Micro Devices

(AMD) stock was up 6.2% to $116.61, while

Nvidia

(NVDA) stock was up 6.1% to $237.48.

Wedbush analyst Matthew Bryson told Barron’s via email that chip stocks may have reacted to the Ukraine situation, with the moves for TSMC and UMC reflecting growing concerns about Taiwan-China relations.

“I think it’s very difficult to explain GFS’s (and to some extent INTC’s) gains today in contrast to the pressure both UMC and TSM are seeing without assuming the market is extrapolating Russia’s invasion of Ukraine as signaling additional risk around Taiwanese/Chinese relations and Taiwanese assets,” Bryson says.

Reuters also reported Thursday that Taiwan warned nine Chinese aircraft that entered its air defense zone, though Bryson notes that China’s air force flying into Taiwan’s space has been a somewhat common occurrence recently. He thinks the China-Taiwan situation is much different from what’s happening in Ukraine.

“The latter share a land border, Ukraine is less vital to the world economy, and Putin seemingly acts abruptly,” he says. “In contrast Taiwan is an island (making an invasion far more difficult logistic, its semiconductors are irreplaceable today (so it’s far more important to the West economically), and China tends to play the long game.”

TSMC is a key supplier of chips for the likes of

Apple

(AAPL),

Qualcomm

(QCOM), and AMD. Tensions with China have for years been the firm’s biggest risk, though President Biden has said it would defend Taiwan if China invaded. And the implications of such a conflict would reach far beyond TSMC stock.

Write to Connor Smith at [email protected]