Despite TSMC (2330.TW) delivering a stellar report card at its earnings call after the market close on July 16—highlighted by a 77% surge in net profit for the previous quarter and an upward revision of its full-year capital expenditure to between $60 billion and $64 billion (approximately NT$1.9 trillion to NT$2.1 trillion)—the bullish news failed to stem heavy selling pressure across the U.S. semiconductor sector. The Philadelphia Semiconductor Index plummeted 531.39 points, or 4.29%, to close at 11,867.50 on July 16, dragging Taiwan index futures down as much as 1,227 points during the night session as market panic spread.
TSMC's ADR also succumbed to the sell-off following the earnings call, closing down 2.32% at $409.74 (approximately NT$13,000), equivalent to roughly NT$2,643.64 per share, still commanding a premium of 20.75% over its Taipei-listed shares. UMC's (2303.TW) ADR fared even worse, tumbling 10% to become the hardest-hit name within the semiconductor group.
All four major U.S. stock indices posted weakness on July 16. The Dow Jones Industrial Average fell 105.32 points, or 0.20%, to close at 52,553.32. The S&P 500 declined 38.63 points, or 0.51%, to 7,533.77. The Nasdaq Composite dropped 387.28 points, or 1.47%, to 25,881.95. Market traders are assessing whether corporate earnings are strong enough to sustain further gains in the artificial intelligence (AI) trade, while uncertainty surrounding the situation in the Middle East continues to simmer.
Taiwan Stocks See Wild Intraday Swings as TSMC Bucks the Trend
Looking back at Taiwan's stock market performance on July 16, the TAIEX charted a roller-coaster course. Weighed down by the previous session's weakness in the Philadelphia Semiconductor Index, the benchmark opened at 45,511.98, down 119.61 points. As TSMC fell NT$20 to NT$2,420 at one point, and MediaTek (2454.TW) and Delta Electronics (2308.TW) both dropped more than 3%, the TAIEX hit an intraday low of 44,970.64, plunging 660.95 points and breaching the 45,000-point mark.
However, as TSMC's afternoon earnings call approached, bargain-hunting emerged ahead of the event. The heavyweight stock reversed course from losses to gains, closing at NT$2,470, up NT$30 or 1.23%, serving as the most critical pillar of support for the broader market. The TAIEX ended the session only marginally lower, down 6.61 points, or 0.01%, at 45,624.98. Trading volume shrank to NT$900.84 billion (approximately $27.9 billion), marking the lowest single-day volume in nearly three months and underscoring a strong wait-and-see sentiment.
Market breadth was mixed, with 409 stocks advancing and 679 declining, while 17 stocks hit the daily limit up and 7 hit the limit down. Among the five major electronic heavyweights, Hon Hai (2317.TW) opened higher and continued to climb, closing at NT$242.5, up NT$3.5 or 1.46%. Delta Electronics opened lower but reversed higher, closing at NT$1,905, up NT$15 or 0.79%. MediaTek remained under pressure, closing at NT$3,700, down NT$40 or 1.07%. ASE Technology Holding (3711.TW) closed at NT$682, down NT$1 or 0.15%.
Selling pressure was more pronounced in the over-the-counter market, with the TPEx index closing at 407.01, down 9.40 points or 2.26%, on turnover of NT$206.26 billion (approximately $6.4 billion), reflecting a continued exodus of capital from high-valuation and speculative stocks.
Bullish Earnings News Overwhelmed by Macro Headwinds; AI Trade Sustainability Questioned
TSMC's earnings call delivered multiple positive catalysts, including a 77% surge in net profit, an upward revision to its full-year revenue outlook, and capital expenditure exceeding the $60 billion mark. However, these positive signals failed to propel the tech sector higher. Market analysts noted that semiconductor stocks faced massive selling during the U.S. trading session on July 16, primarily driven by growing investor skepticism over the sustainability of the AI-driven rally.
The dominant role that chipmakers have played in this year's stock market advance is increasingly being challenged. In addition to grappling with elevated stock valuations, traders are also pondering whether AI hyperscalers are building capacity that exceeds actual demand. Richard Flynn, Managing Director at Charles Schwab UK, commented on the situation: "Market concentration has been very high, which means there is little room for error. Global geopolitical risks are rising, so from a macro perspective, the overall market tone is tilting toward caution."
As soon as U.S. markets opened, the Nasdaq Composite fell more than 100 points, while the Philadelphia Semiconductor Index—closely correlated with Taiwan stocks—tumbled over 2%, and TSMC's ADR plunged more than 3%. Selling pressure in Taiwan index futures during the night session was heavy, with the contract briefly crashing 1,227 points to 44,464, indicating that even though heavyweight stocks managed to prop up the market at the close of Taiwan's regular session, night trading had already begun pricing in pessimistic expectations for the market outlook.
Divergent Sector Performance; Traditional Industries and Bicycle Stocks Buck the Trend
While electronic stocks broadly faced pressure, certain traditional industry sectors bucked the trend. A recovery in bicycle demand propelled related stocks sharply higher, with Giant Manufacturing (9921.TW) surging to its daily limit up, Merida Industry (9914.TW) rallying about 9%, and KMC (5306.TW) gaining about 8%. Oil, gas, and petrochemical stocks also continued to strengthen, with Formosa Petrochemical (6505.TW) up about 7%, Formosa Plastics (1301.TW) up about 2%, and Formosa Chemicals & Fibre (1326.TW) up about 1%.
Within electronic sub-sectors, the semiconductor group rose 0.37% overall, other electronics gained 1.22%, and networking and communications stocks added 0.39%. However, electronic components fell 1.93%, computer peripherals dropped 1.29%, and financial stocks edged down 0.02%. Among individual stocks, Nanya Technology (2408.TW) tumbled 8.73% and UMC fell 3.61%, standing out as notable laggards.
Overall, market capital rotated rapidly between electronics and traditional industries, but the divergence between heavyweight stocks and small- to mid-cap names was stark. TSMC, buoyed by pre-earnings positioning, successfully stabilized the broader market, but the sharp decline in the TPEx index signaled a clear cooling of speculative sentiment, with funds rotating out of richly valued small- and mid-cap stocks and into more defensive heavyweight and traditional industry names.
The latest U.S. inflation data came in below market expectations, easing concerns about further Federal Reserve rate hikes this year, and both the Dow and S&P 500 closed higher on Wednesday. However, this positive catalyst failed to carry over into the Asian trading session. After opening lower on the morning of July 16, Taiwan stocks saw their losses significantly pared thanks to TSMC's late-session surge, but the overall cautious mood persisted, with trading volume shrinking to a near three-month low, indicating that investors broadly adopted a conservative strategy ahead of the earnings call results. The heavy selling pressure in U.S. markets overnight has further clouded the outlook for Taiwan stocks going forward.
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