Nomura Cuts Taiwanese Stocks on AI Sector Scrutiny, Tariffs

Nomura Holdings Inc., a prominent Japanese brokerage, has recently turned conservative on several Taiwanese contract notebook computer makers due to looming structural changes in the market. This shift in sentiment comes amidst concerns over future investments in artificial intelligence (AI) development and the uncertainty created by the Trump administration's tariff war. As a result, shares in Taiwan extended their losses from a session earlier, closing down by more than 270 points on Tuesday, February 25, 2025.

The Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended down 279.59 points, or 1.19 percent, at 23,285.72, after moving between 23,209.53 and 23,376.42. Turnover totaled NT$392.17 billion (US$11.96 billion). The market opened down 0.80 percent and selling escalated with contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) in focus as investors took their cue from a 2.59 percent plunge on the Philadelphia Semiconductor Index and a 1.21 percent drop on the tech-heavy Nasdaq index overnight following reports of Microsoft canceling some leases for data center capacity.

TSMC, the most heavily weighted stock in Taiwan, lost 1.86 percent to close at NT$1,055.00, contributing about 160 points to the Taiex's decline. This decline sent the electronics index and the semiconductor sub-index lower by 1.62 percent and 1.55 percent, respectively. The sell-off in Taiwanese semiconductor stocks was sparked by fears over a possible AI growth slowdown in the future after recent massive investments, as well as the uncertainty created by the Trump administration's tariff war.



Among other semiconductor stocks, application specific integrated circuit (ASIC) designer Alchip Technologies Ltd. shed 4.06 percent to end at NT$3,305.00, and United Microelectronics Corp., a smaller contract chipmaker, dropped 0.57 percent to close at NT$43.30. Bucking the downturn, smartphone IC designer MediaTek Inc. ended up 0.32 percent at NT$1,550.00. In the wake of a 3.09 percent fall suffered by U.S.-based AI chip designer Nvidia Corp. overnight, iPhone assembler Hon Hai Precision Industry Co. shed 3.53 percent to close at NT$177.50, and rival Quanta Computer Inc. lost 3.96 percent to end at NT$254.50.

Wistron Corp., another AI server supplier, lost 2.61 percent to close at NT$112.00, and AI graphics card vendor Giga-Byte Technology Co. dropped 1.51 percent to end at NT$261.50. Despite the sell-off in tech-heavy stocks, select old economy heavyweights remained resilient, attracting buying rotated out of TSMC shares. Their gains helped the Taiex from falling further, although analysts noted that these gains were technical in nature on low valuations.

In the petrochemical industry, shares in Formosa Chemicals & Fibre Corp. rose 2.69 percent to close at NT$30.55, Formosa Plastics Corp. gained 1.64 percent to end at NT$40.35, Formosa Petrochemical Corp. added 1.63 percent to close at NT$40.45, and Nan Ya Plastics Corp. ended up 0.73 percent at NT$34.50. Elsewhere in the old economy sector, China Steel Corp., the largest steel maker in Taiwan, rose 3.02 percent to close at NT$23.90, and Ta Chen Stainless Pipe Co. soared 8.43 percent to end at NT$48.25.

In the financial sector, which lost only 0.02 percent, Fubon Financial Holding Co. rose 0.11 percent to close at NT$91.70, while Cathay Financial Holding Co. ended unchanged at NT$68.70. According to the TWSE, foreign institutional investors sold a net NT$51.34 billion worth of shares on the main board Tuesday.

The recent sell-off in Taiwanese stocks, particularly those in the AI and semiconductor sectors, reflects investors' concerns about future AI growth and tariff-related uncertainties. The decline in Taiwan Semiconductor Manufacturing Co. (TSMC) shares can be attributed to specific factors, including Microsoft's data center capacity cancellation, uncertainty created by the Trump administration's tariff war, and technical weakness. These factors may influence the broader Taiwanese stock market in the short and long term, with potential impacts on other semiconductor stocks and related industries. The gains in old economy heavyweights, such as Formosa Chemicals & Fibre Corp. and China Steel Corp., suggest a rotation in investor sentiment, with investors moving funds from tech-heavy stocks to more stable, old economy sectors. This rotation may be due to concerns over future investments in artificial intelligence development and the uncertainty created by the Trump administration's tariff war.