TSMC stock falls behind UMC after ETF exclusion

Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s top contract chipmaker, is seeing its stock lag behind smaller competitor United Microelectronics Corp. (UMC). This year, TSMC’s shares have dropped by 3.7%, while UMC’s shares have climbed 11%, according to Bloomberg data. The gap widened after some of Taiwan’s largest dividend-focused exchange-traded funds (ETFs) overlooked TSMC for inclusion.

Investors expected TSMC, with its strong market position, to be a prime pick for these ETFs, which prioritize companies offering high dividend yields. However, the funds favored UMC, likely due to its more attractive dividend payout relative to its stock price. This snub has disappointed TSMC investors, contributing to the stock’s weaker performance.

Despite the setback, TSMC remains a giant in the chip industry, producing components for major clients like Nvidia and Apple. Its recent 40% revenue surge in May highlights robust demand, particularly for AI chips. Analysts still project solid growth for TSMC, with second-quarter sales expected to rise by 39%. Meanwhile, UMC’s smaller size and focus on specific chip markets have helped it gain favor with yield-seeking investors.

The broader market context also plays a role. Rising geopolitical tensions and trade uncertainties have impacted Taiwan’s stock market, with TSMC’s ex-dividend performance recently falling short of expectations. Still, some analysts believe TSMC’s long-term outlook remains strong due to its critical role in global tech supply chains. Investors are advised to research thoroughly before making decisions, as market dynamics can shift quickly.