Taipei: Shares of Taiwan Semiconductor Manufacturing Co. (TSMC) experienced a downturn on Monday, following reports that Apple Inc. intends to divert some of its chip orders from TSMC to Intel Corp. The news led to a 2.40 percent drop in TSMC's stock price to NT$2,235.00 (US$71.18) on the Taiwan Stock Exchange, as investors reacted to the unexpected development.

According to Focus Taiwan, the decline was prompted by a Wall Street Journal report indicating a preliminary agreement between Apple and Intel for the latter to produce some chips for Apple devices. Mega International Investment Services analyst Alex Huang described the reaction as a "knee-jerk" response, noting that TSMC had been at the forefront of a significant rebound in the semiconductor industry over the past month. Despite the recent dip, Huang emphasized that TSMC's losses were minor compared to its previous gains, and investors remain optimistic about the company's robust fundamentals amid the current AI boom.

TSMC shares had previously surged 31.25 percent since March 31, significantly bolstering the Taiex index by 31.15 percent. Huang highlighted TSMC's dominant position in the high-end chip market, citing its strong pricing power and the necessity for buyers to comply with its pricing demands. He also pointed out that Apple's decision to involve a second chip supplier was not unexpected.

Intel's trial run of the 14A process, comparable to TSMC's 2 nanometer process, yielded a 90 percent success rate. However, Huang noted this was merely a trial phase, whereas TSMC has already commenced mass production of the 2nm process, with robust demand continuing.

Li Fang-kuo, Chairman of President Capital Management Co., stated that Apple's choice to engage Intel was not a reflection of any technological shortcomings at TSMC, but rather a response to the overwhelming demand from AI customers like Nvidia Corp., which has constrained TSMC's production capacity. In the long term, Huang cautioned investors to remain vigilant as other TSMC clients might also consider seeking additional suppliers.

Despite Monday's decline, which saw TSMC shares fall below NT$2,272-considered a technical support level-Huang described it as a temporary technical setback. He predicted that even if the stock dipped below the 20-day moving average of NT$2,152, it would likely rebound after a brief consolidation period of two to four weeks.