TSMC Results Face High Bar to Calm Global AI Stock Trade Jitters

(Bloomberg) -- With strong earnings from global chip majors failing to boost the AI trade, Taiwan Semiconductor Manufacturing Co. faces a high bar to impress investors.

The Philadelphia Semiconductor Index has shed more than $1.5 trillion in market value over the past six sessions on concerns over interest rates, financing for the AI buildout and the longevity of the chip cycle.

TSMC has already reported a 51% surge in quarterly sales ahead of its detailed earnings report due Thursday. Still, solid recent results from Samsung Electronics Co. and ASML Holding NV have done little calm market anxiety over chip shares.

"The bar is very high," said Kevin Net, a portfolio manager at Financiere de L Echiquier. "To get a positive share price reaction, I think we need more than just a beat." He's looking for high margins and capital spending from TSMC, as well as signals of strong demand for AI and high-performance computing.

TSMC touched a record high earlier this month, among the first chip stocks globally to refresh its high after the July rout. It has been outperforming peers thanks to its dominant position in outsourced manufacturing of processors needed to power the continued flood of new AI agents from major tech firms like Meta Platforms Inc.

Yet it got caught up in the broader pullback in chip shares over the past week amid concerns over AI funding. Against this backdrop, TSMC's results and guidance will be scrutinized to validate the sector's growth narrative.

"The key readacross is whether TSMC turns more bullish on the duration and scale of AI demand," said James Ooi, market strategist at Tiger Brokers. A bump in management's AI accelerator revenue forecast or detail on the size of the gap in supply and demand for advanced chipmaking would be welcomed, he said.

Consensus estimates have been climbing for the Taiwanese foundry's 2027 capital spending, which is seen as a key metric for its share price. Goldman Sachs Group Inc. now targets $85 billion and UBS Group AG sees $90 billion, compared with the $75 billion average of firms polled by Bloomberg.

"Capex remains the utmost focus, as the company will likely continue to publicly state it remains committed to fulfilling backlogged customer demand," JPMorgan Chase & Co.'s sales desk wrote in a note to clients this week.