[Today’s Signal] TSMC Posts Record Profit as Korean Stocks Plunge, Exposing a Divide in AI Investment

Taiwan Semiconductor Manufacturing Company (TSMC) released its third-quarter earnings on October 15, revealing record-breaking net income of NT$763.06 billion (approximately US$23.6 billion), a 68.7% increase from the previous year. The company's revenue also surged by 50.9% to NT$1.49 trillion (US$46.72 billion), driven by robust demand for advanced semiconductors utilized in AI computing and other high-performance applications.

Conversely, South Korea's stock market experienced a significant downturn, with the KOSPI index plummeting 7.57% to close at 5,554.22. Major semiconductor firms such as Samsung Electronics and SK hynix witnessed sharp declines of 9.5% and 11.1% respectively, driven by investor concerns over the sustainability of global AI investment. These worries were amplified by rising US inflation, increased interest rates, and apprehensions surrounding the financial viability of AI infrastructure expansion.

Despite TSMC's strong performance, the contrasting reaction in Korean markets highlights a growing divide within the AI investment landscape. While advanced semiconductor manufacturing remains in high demand, investors are increasingly scrutinizing the long-term profitability of AI infrastructure expansion and the ability of AI-related companies to generate sufficient revenue and cash flow to justify their spending.

The Korean semiconductor stocks' sharp decline can be attributed to broader investor sentiment, foreign capital flows, and expectations for future AI spending. The selloff followed weakness in US technology shares, further exacerbating the pressure on AI-related stocks. The rapid decline in Korean equities also triggered a circuit breaker, temporarily halting trading to prevent further losses.

While TSMC's record earnings underscore the ongoing demand for advanced semiconductor manufacturing, the sharp decline in Korean stocks suggests that investors are applying greater scrutiny to the economics of AI industry expansion. The divergence between TSMC's strong performance and the Korean market's reaction underscores the complex relationship between semiconductor supply and AI investment dynamics.