TSMC Drops to 2290—Time to Buy? Scholar Reveals 'Two-Stage Profit' After Margin Squeeze: Institutions Are Building Positions by Pressuring Prices

TSMC (2330), known as Taiwan's 'national guardian mountain,' delivered another outstanding performance during its earnings call on the 16th, with its gross margin soaring to 67.7%, setting a new single-quarter record. Yet, the very next day, Taiwan's stock market crashed by a staggering 2,953 points, marking the largest closing drop in history. TSMC's share price plummeted 180 NT dollars, closing below 2,300 at 2,290.

In response, macroeconomist Wu Chia-lung analyzed the situation on Facebook early on the 18th under the title 'TSMC—a good stock mistakenly sold off.' Drawing from Warren Buffett's investment logic, he stated that when a fundamentally strong stock is unfairly punished, it creates a 'two-stage profit' opportunity—'This is the market giving you a chance to buy!'

How impressive was TSMC's performance? Despite a post-earnings drop of over 7%, the numbers were exceptional. TSMC held its earnings call on the 16th, reporting a Q2 EPS of 27.25 NT dollars and consolidated revenue of approximately $40 billion—up 36% year-on-year and 12% quarter-on-quarter. Its gross margin hit 67.7%, with an operating margin reaching 60.3%, far exceeding market expectations.

However, following this strong report, Taiwan's stock market closed down 2,953 points on the 17th at 42,671, breaking below the 43,000 threshold and setting new records for both intraday and closing losses in Taiwan's history. TSMC ended the day down 180 NT dollars at 2,290, a 7.3% decline, with its market cap falling below 60 trillion NT dollars.

Was TSMC’s earnings call the trigger for the market crash? Wu Chia-lung analyzed that the 2,953-point plunge was undoubtedly a market crash, and TSMC’s earnings call was one of the sources. Given that TSMC’s Q2 EPS and gross margin both hit record highs, he assessed that 'TSMC was a good stock that was unfairly sold off' and is poised to rebound, potentially reaching his previously forecast target of 3,500 NT dollars. He also highlighted TSMC’s strong outlook and robust customer demand, citing its announcement to expand U.S. investment by $100 billion and add four new chip fabrication plants—moves that exceeded market expectations.

Why did the stock price drop so sharply on the 17th? Wu speculated that large institutional and strategic investors, interested in increasing their TSMC holdings, may have first taken profits, pushed the price down, and are now rebuilding positions. As for the 'excuse' used? They may have seized on a minor point from the earnings call—the 'slight downward revision in Q3 gross margin guidance'—to trigger a sell-off. This led to a drop in TSMC’s ADR, which in turn dragged down U.S. semiconductor stocks, resulting in massive selling pressure when Taiwan’s market opened on the 17th.

Many investors worry that TSMC’s expanded U.S. investment will increase costs and hurt margins. However, Wu argues that TSMC’s U.S. expansion will squeeze competitors, enhancing its pricing power. In other words, just as investors fear margin compression, TSMC can raise prices to protect margins. In fact, TSMC is reportedly preparing to raise prices for mature-node chips. He further suggests that selling based on a minor margin dip to create panic selling may be a strategy to lower acquisition costs.

Was the Taiwan market crash a 'margin liquidation' (kill financing)? Can investors still get in next Monday? Wu analyzed that this pullback is a natural correction after a strong rally—a 'shakeout' to deleverage, commonly known as 'killing margin.' This cleansing makes future upward momentum easier. According to Buffett’s logic, a good stock that’s unfairly sold off offers two stages of profit: first, a rebound; second, continued growth after returning to normal. For example, if TSMC drops from 2,500 to 2,000, the 500-point decline will likely rebound, followed by new highs. He concluded: 'When a fundamentally strong stock drops sharply and suddenly, it’s an invitation to buy,' adding, 'panic-driven selloffs are unsustainable because investor fear doesn’t last long.'