TSMC Slides 1.76% as U.S. Weighs Equity Stake in CHIPS Act Overhaul Ranking 14th in Market Activity

On August 20, 2025, TSMC (TSM) closed at $228.60, down 1.76% with a trading volume of $3.89 billion, ranking 14th in market activity. The decline followed reports that the U.S. government is considering converting CHIPS Act grants into equity stakes in semiconductor firms, including TSMC. Commerce Secretary Howard Lutnick indicated potential renegotiations of subsidies, which could see the government take a 10% ownership stake in TSMC in exchange for $6.6 billion in previously awarded funding. This shift from "free money" to equity would dilute shareholder value and alter the company’s balance sheet dynamics.

Investor concerns stem from broader regulatory uncertainty. The Trump administration’s proposed changes to CHIPS Act terms, initially seen as supportive, are now perceived as dilutive and restrictive. Analysts warn that such measures could undermine the economic benefits intended for U.S. semiconductor manufacturers. Wedbush analysts described the policy shift as "a stick rather than a carrot," noting that equity conversions would reduce shareholder equity and potentially favor domestic competitors like Intel over TSMC. The PHLX Semiconductor Index (SOX) fell nearly 1% amid sector-wide selling pressure, with TSMC among the most significant decliners.

Technical indicators suggest short-term bearish momentum. TSMC’s price dropped to $223.70 intraday, nearing its 52-week low of $134.25. Options activity highlights bearish positioning, with put options like TSM20250829P217.5 seeing high turnover. The stock’s 200-day average of $199.13 and RSI at 39.84 signal oversold conditions, though volatility remains elevated. Analysts caution that regulatory overhauls and geopolitical risks could prolong uncertainty, forcing investors to reassess long-term valuations in the sector.

Backtest data from 2022 to 2025 shows a strategy of buying top 500 volume stocks and holding for one day yielded a 0.98% average daily return, with a total return of 31.52% over 365 days. This suggests limited short-term momentum capture but reflects market volatility and timing risks inherent in such strategies.