What's Going On With Taiwan Semiconductor Manufacturing Stock Tuesday?

Taiwan Semiconductor Manufacturing Company Ltd TSM shares are trading lower Tuesday amid reports that the company will likely report a 27% decline in second-quarter net profit on Thursday as global economic woes weigh on semiconductor demand.

 Interestingly, analysts say business performance will likely improve in the current quarter.

The primary Apple Inc AAPL and Nvidia Corp NVDA supplier is likely to report net profit for the April-June period of T$172.53 billion ($5.58 billion), down from T$237.0 billion a year earlier, Reuters cites the average of 21 analysts.

Also Read: Taiwan Semiconductor Founder Highlights How US Sanctions Pose A Double Whammy In Form Of Rising Costs, Chip Availability

The forecast decline partly reflects correction upon pandemic recovery.

Analysts at Taiwan's Fubon Investment expected Q2 to be the bottom of the current downcycle. However, while the situation should improve in Q3, it would be weaker than usual, given continued inventory build-ups.

One senior Taiwan fund manager told Reuters that Q3 profit would bounce back, given expectations for AI demand and launches of new iPhones ahead of the year-end holiday shopping season.

The Q2 is traditionally a slow period for sales for the tech industry, with demand usually picking up in the third quarter and towards the year-end shopping season.

In June, the company voiced a better performance in the second half than the first, courtesy of the growing demand for AI applications.

The bright outlook for AI applications has partly driven up TSMC's Taipei-listed stock by almost 30% this year, outperforming the broader market.

TSMC's second-quarter revenue came in at T$480.8 billion ($15.53 billion), according to Reuters, in the middle of an April forecast range of $15.2 billion - $16 billion, compared to $18.16 billion for the year-ago period.

In May, Warren Buffett's Berkshire Hathaway Inc (NYSE: BRK-A) (NYSE: BRK-B) disclosed paring its remaining stake in the leading contract chipmaker, expressing concerns over growing tensions between the U.S. and China.

Price Action: TSM shares traded lower by 1.09% at $103.65 in the premarket on the last check Tuesday.