TSMC ADR plunges nearly 6%, can Taiwan stocks escape the sell-off? Strategist points out the resilience of the sacred mountain that protects the country from stress

Taiwan's weighted index is expected to face significant downward pressure on Monday, driven by a broad sell-off in U.S. technology stocks. Taiwan Semiconductor Manufacturing Co.'s (TSMC) American Depositary Receipts (ADRs) plunged nearly 6% overnight as concerns over huge spending in artificial intelligence led to a broad decline in U.S. technology stocks.

Focus Taiwan reported that Huang Wenqing, chief strategist of Taishin Securities Investment Consultants, told Central News Agency that market sentiment is still affected by huge expenditures on artificial intelligence and growing concerns that large cloud service providers may struggle to generate significant sales from their huge investments in artificial intelligence infrastructure. Investors will be watching whether the Taiwan Weighted Index can hold on to Friday's intraday low of 44,726 points or whether it will fall further.

Concerns about an artificial intelligence bubble have intensified after several large U.S. technology companies reported their latest earnings during the current earnings season, with some companies' disappointing sales triggering share price drops, Huang said. Overnight, the Nasdaq index, which is dominated by technology stocks, fell 2.86%, and the Philadelphia Semiconductor Index plummeted 7.20%. TSMC’s American depositary receipts also fell 5.95%.

Huang Wenqing said that since the beginning of October, global technology stocks have suffered huge selling pressure, and the Taiwan stock market has not been immune. Especially large electronics stocks like TSMC, whose market value accounts for more than 40% of TSMC's total market value, have become the targets of investors.

On Friday, the Taiwan Weighted Index plummeted 1,156.50 points, or 2.49%, to close at 45,211.83 points, falling below the key technical support level around 45,300 points, which coincides with the 120-day moving average, making the index more technically vulnerable.

Affected by the latest selling wave in the U.S. market, Taiwan Weighted Index futures were also under pressure, falling 867 points, or 1.91%, to 44,433 points overnight; TSMC futures fell 3.66%.

However, Huang Wenqing said that TSMC seems to be more resilient compared with the Philadelphia Semiconductor Index and the Korean market, where memory chip suppliers such as Samsung Electronics and SK Hynix occupy a considerable market share.

Huang Renxun, CEO of Huida, also said that more importantly, the development of artificial intelligence has not slowed down, because major cloud service providers Meta Platforms Inc., Alphabet Inc., Amazon.com Inc. and Microsoft Corp continue to invest heavily in artificial intelligence infrastructure.

All three major U.S. stock indexes fell on Friday, with the Nasdaq falling 2.9%. The tech-heavy index is down 7.8% from its all-time closing high set on Oct. 6. The plunge in technology stocks was triggered by Intel's disappointing quarterly results. Although Amazon's stock price recovered some of its losses during the trading session, Intel's stock price still plunged 28.6%.

Chip stocks fell sharply, with Huida's stock price falling the most; Chaos Micro fell 10.9%. Server maker Dell's stock price fell 7.2%, a monthly drop of more than 15%, and Hewlett-Packard Co. fell 9.6%.