No one is going to blow up Taiwan Semiconductor

Additional tension between China, the United States and the importance of Taiwan Semiconductor Manufacturing Company may signal the end, at least when it comes to the plunge in stock prices of affected or related semiconductor companies.

Today’s news is as close to a crescendo of threats as may be possible, without the next step being actual action.

https://www.bloomberg.com/news/articles/2022-10-12/no-need-to-blow-up-tsmc-in-china-war-taiwan-security-chief-says?sref=qLOW1ygh

This heightened angst may signal we are nearing the end of the tough talk but it’s a reminder that he deeper reason for many stoushes involving the United States are about trade and economics.

Will China actually take over TSMC?

This post I wrote in February 2022 put TSMC’s importance in perspective.

This post also written in February 2022 posed a put option trade idea should things become a little more ‘hairy’.

Since late February, shares in TSMC have fallen 50% and those options have risen 4-fold.

Was Pelosi’s visit to Taiwan worth it?

Since Nancy Pelosi arrival on Taiwan soil on August 2nd, 2022, the SOX Index has fallen 27%. 

Good one Nance ! 

All of that in 2 months but I think hubby, Paul’s call option buying of Nvidia in the days prior to you announcing the trip to Taiwan haven’t worked out either (presuming he’s still holding them) as that stock has tanked 39% since your visit.

Is Biden’s decision on Friday October 7th, 2022 to ban semiconductor (and equipment) exports to China wise?

https://www.bloomberg.com/news/articles/2022-10-07/white-house-announces-new-restrictions-on-chip-exports-to-china?sref=qLOW1ygh

Since then (in 3 trading sessions) the shares in LAM Research, Applied Materials, Intel, AMD, Nvidia, KLA Corp, ASML and TSM have fallen 19%, 14%, 8%, 15%, 12%, 15%, 13% and 15% respectively.

Biden is still help bent on his pre-mid term election strategy of being tough on China and invoking massive domestic spending (the opposite to Obama, whom Biden blames for their mid-term mauling in 2014) but he causing higher inflation by ‘de-globalising’ relations which have traditionally assisted the United States and various nationalism and protectionist measures are adding to global tensions.

I don’t think Biden realises the job losses and investment losses he is about to cause with these export bans, let alone the investment losses being caused. 

For some perspective, notwithstanding overvaluations and possible slowing product demand, since is price peak in November 2021, Nvidia has seen its shares fall 65% and its market capitalisation has declined by $554 billion.

That is the same amount of money if you wiped out the entire market capitalisation of Australia’s largest 4 banks, BHP, Rio Tinto, Wesfarmers and Woolworths or 50% of the total market capitalisation of companies listed on the Australian Stock Exchange (ASX).

October 12, 2022

by Rob Zdravevski

rob@karriasset.com.au

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