(Bloomberg) — Shares of Taiwan Semiconductor Manufacturing Co. fell the most in three months after trading resumed, joining a global technology rout as investors soured dramatically on the promises of artificial intelligence.
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Stocks fell 5.6% in Taipei on Friday, dragging down the benchmark Taiex index, which fell more than 3%, close to a technical correction. Other chip stocks ASE Technology Holding Co. and Hon Hai Precision Industry Co. each fell at least 4%. Local markets have reopened after a two-day closure due to a typhoon.
Weak profits at big U.S. tech companies have triggered a reckoning with AI hype. The latest tech rout adds further pressure to TSMC, whose record rally has been faltering since mid-July. A favored AI play due to its cutting-edge chips and stellar profits, concerns over expensive valuation and the risk of tighter U.S. restrictions on chip sales to China have poured cold water on the bullish momentum.
The rotation out of long-valued technology names was “exacerbated by weak early technology reporting results and some negative newsflow on China tariffs,” said Vey-Sern Ling, managing director at Union Bancaire Privee. “Whether the tech sell-off continues will depend on next week’s key results, which will see four of the Magnificent Seven stock reports.”
TSMC’s Taiwan listing is down more than 14% from its peak. Its decline poses problems for the local financial market, as the shares represent more than a third of Taiex’s weight.
The change in the fortunes of the island’s shares was rapid. Earlier this year, growing interest in AI stocks triggered an unprecedented investment boom in Taiwan. The rally prompted retail investors to pile into exchange-traded funds and prompted local regulators to warn about herding behavior.
TSMC’s recent slump could be due to profit-taking, while “whispers of a potential slowdown in the AI investment boom could also be in play,” said Manish Bhargava, CEO of Straits Investment Management Pte Ltd. The pressing question is: is the AI rally running out of steam?
A TSMC spokesperson said there had been no impact from the typhoon as of Thursday.
Read: Taiwan stock exchange to remain closed for second day due to typhoon
Taiwan’s stock market, valued at $2.5 trillion, was closed on Wednesday and Thursday as deadly typhoon Gaemi approached after inundating the Philippines. The last time Taipei was closed for two consecutive days due to a typhoon was in 2016.
The Taiwanese dollar rose as much as 0.2% against the greenback on Friday before trading little changed. Earlier this month, it fell to its weakest level since 2016 amid intensifying outflows from local stocks.
–With assistance from Iris Ouyang and Jane Lanhee Lee.
(Updates with closing prices)
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