US sell-offs pose challenge for TAIEX

OUTLOOK: Tech stocks worldwide have come under selling pressure ever since last month, and Taiwan’s stock market is not expected to be spared, an analyst said

The TAIEX is expected to face heavy downward pressure today after American depositary receipts of contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) on Friday plunged 5.95 percent, tracking a broader sell-off in US tech stocks on Wall Street amid concerns over massive artificial intelligence (AI) spending.

Disappointing sales at some US technology companies spurred the worst drop for stocks since June, with the tech-heavy NASDAQ Composite Index falling 2.86 percent on Friday, while the Philadelphia Semiconductor Index plunged 7.20 percent and the S&P 500 fell 1.8 percent, breaching its 100-day moving average.

Chipmaker Intel Corp and social media firm Reddit Inc fell 29 percent and Sandisk Corp, a chipmaker that has been one of the great beneficiaries of the AI capital-spending boom, dropped 13 percent.

A man stands in front of an electronic stock board at the Taiwan Stock Exchange in Taipei on Oct. 8.

Photo: CNA

Market sentiment remained clouded by concerns over heavy AI spending and growing fears that major cloud service providers might struggle to generate comfortable sales from their massive investments in AI infrastructure, Taishin Securities Investment Advisory Co (台新投顧) chief strategy officer Tony Huang (黃文清) said on Saturday.

Tech stocks worldwide have come under heavy selling pressure since the beginning of last month, and Taiwan’s stock market is unlikely to be spared, particularly as large-cap electronics stocks such as TSMC have been targeted by investors, Huang said.

On Friday, the TAIEX plunged 1,156.50 points, or 2.49 percent, to close at 45,211.83, breaking below the key technical support level of about 45,300 points, which coincides with its 120-day moving average, leaving the benchmark index technically more vulnerable.

Following the latest sell-off in the US market, TAIEX futures also came under pressure, falling 867 points, or 1.91 percent, to 44,433 on Friday, while TSMC futures lost 3.66 percent.

However, the TAIEX appeared relatively resilient compared with the Philadelphia Semiconductor Index and the South Korean market, where memory suppliers such as Samsung Electronics Co and SK Hynix Inc account for a significant share of market activity, Huang said.

More importantly, AI development has not slowed, as major cloud service providers Meta Platforms Inc, Alphabet Inc, Amazon.com Inc and Microsoft Corp have maintained their commitments to substantial spending on AI infrastructure, he said.

Taiwan Stock Exchange’s statistics showed that foreign institutional investors were largely net sellers of Taiwanese shares last month, recording net sales of NT$994.3 billion (US$30.61 billion), by reducing their holdings in major tech stocks such as TSMC, chip designer MediaTek Inc (聯發科) and power management solutions provider Delta Electronics Inc (台達電).

Global markets face additional uncertainty from the upcoming US midterm elections tomorrow and a planned initial public offering by AI safety and research company Anthropic PBC later this month, factors that have prompted large funds to pull money out of Asian markets, analysts said.

Investors would be watching whether the TAIEX will hold above Friday’s intraday low of 44,726 points or record further losses, they added.