Market Reaction to TSMC Earnings
On Thursday, the Nasdaq declined by 1.3%, while the Direxion Daily Semiconductor Bull 3X Shares ETF (NYSEMKT: SOXL) plummeted 14.5%. This sharp drop was triggered by Taiwan Semiconductor Manufacturing Company’s (NYSE: TSM) Q2 earnings report, which, despite showcasing a revenue increase of 33% to $39.4 billion and profits up by 77% to $21.9 billion, revealed weaker free cash flow at just $8.9 billion.
TSMC’s projected capital investments for the year rose from $54 billion to over $60 billion, causing concern among semiconductor investors about the sustainability of AI chip production costs. Stocks of major semiconductor companies, including Nvidia (NASDAQ: NVDA), Micron (NASDAQ: MU), and Intel (NASDAQ: INTC), also fell in response, contributing to SOXL’s severe losses due to its leveraged exposure to these stocks.
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