Taiwan Semiconductor Manufacturing Co. (TSMC) and ASML both reported strong earnings this week, driven by robust demand for AI chips. TSMC saw a remarkable 58% increase in first-quarter profits, marking its fourth consecutive record quarter. Despite this success, TSMC shares fell about 2%, reflecting Wall Street’s cautious sentiment amid high investor expectations. Notably, 61% of TSMC’s revenue came from high-performance computing, primarily AI chips for Nvidia, while smartphone revenue dipped 11%.

ASML also faced a similar fate, with shares dropping 2.5% after a 6.5% decline earlier in the week. While the company raised its forward guidance, it failed to meet the lofty expectations investors had set. Analysts expressed concerns over ASML’s production targets for its advanced EUV lithography machines, crucial for chip manufacturing, which may not align with market demand.

The takeaway for market professionals is clear: despite strong earnings from leading chipmakers, the stocks are under pressure due to elevated expectations. This dynamic could signal broader challenges for the semiconductor sector as earnings season progresses and competition intensifies.

Source: cnbc.com