TSMC Beats on Q1 Earnings, Shares Fall: ETFs in Focus

Taiwan Semiconductor Manufacturing TSM reported its first-quarter 2024 results, wherein it beat estimates for both the top and the bottom lines on strong AI chip demand. This Taiwan-based chipmaker returned to sales and earnings growth after four consecutive quarters of declines on a year-over-year basis.

Despite the earnings beat, shares of TSM dropped nearly 5% on the day as the company took a cautionary view of the industry. Investors could tap the opportune moment with the help of ETFs having the largest allocation to the world’s largest contract semiconductor manufacturer. These include SP Funds S&P World ex-US ETF SPWO, SP Funds S&P Global Technology ETF SPTE, VanEck Vectors Semiconductor ETF SMH, Global X Emerging Markets ex-China ETF EMM and Xtrackers Semiconductor Select Equity ETF CHPS.

Earnings in Focus

The company reported earnings per ADR of $1.38, which outpaced the Zacks Consensus Estimate of $1.29 and improved 8.9% from the year-ago earnings. Revenues rose 16.5% year over year to $18.87 billion and were above the estimate of $18.38 billion.

Taiwan Semiconductor, which makes chips for companies from Apple AAPL to Nvidia NVDA, expects revenue to be in the range of $19.6-$20.4 billion in the second quarter as a global boom in artificial intelligence (AI) development is fueling demand for high-end chips and servers. It expects business to be supported by strong demand for its industry-leading 3 nanometre (nm) and 5nm technologies, partially offset by continued smartphone seasonality (read: Tap Taiwan Semiconductor Growth With These ETFs).

However, the chipmaker dialed back its outlook for a chip market expansion, cautioning that the smartphone and personal-computing markets remain weak. It lowered its outlook for the global semiconductor industry, excluding memory, to a growth rate of around 10% in 2024 from the previous forecast of more than 10%. TSMC also downgraded its growth forecast for the global foundry sector to a mid-to-high teens percentage gain from the previous projection of around 20%.

ETFs to Tap

Let’s delve into each ETF below:

SP Funds S&P World ex-US ETF (SPWO)

SP Funds S&P World ex-US ETF tracks the S&P DM Ex-U.S. & EM 50/50 Shariah Index, which is designed to measure the performance of sharia-compliant components of emerging market and developed market stocks excluding U.S. stocks. It holds a basket of 307 stocks, with Taiwan Semiconductor taking the top spot at 13.7%.

SP Funds S&P World ex-US ETF has accumulated $11.3 million in its asset base since its inception in late December. It charges 55 bps in annual fees and trades in a lower average trading volume of 3,000 shares.

SP Funds S&P Global Technology ETF (SPTE)

SP Funds S&P Global Technology ETF seeks to provide exposure to global technology companies through large and mid-cap stocks. The fund invests in the index with companies that leverage leading new technologies to benefit as the global economy moves toward a post-interest cycle recovery. It follows the S&P Global 1200 Shariah Information Technology (Sector) Capped index and holds 98 stocks in its basket. Taiwan Semiconductor occupies the top position with a 13.6% share.

SP Funds S&P Global Technology ETF has accumulated $28.5 million in its asset base and charges 55 bps in fees per year. It trades in a volume of 8,000 shares a day on average.

VanEck Vectors Semiconductor ETF (SMH)

VanEck Vectors Semiconductor ETF offers exposure to companies involved in semiconductor production and equipment. It follows the MVIS US Listed Semiconductor 25 Index, which tracks the most liquid companies in the industry based on market capitalization and trading volume. VanEck Vectors Semiconductor ETF holds 26 stocks in its basket, with Taiwan Semiconductor occupying the second position at 12.8%.  

VanEck Vectors Semiconductor ETF has managed assets worth $18 billion and charges 35 bps in annual fees and expenses. SMH trades in an average daily volume of 8 million shares and has a Zacks ETF Rank #1 (Strong Buy) with a High-risk outlook (read: Pain or Gain Ahead of Semiconductor ETFs?).

Global X Emerging Markets ex-China ETF (EMM)

Global X Emerging Markets ex-China ETF is an actively managed fund seeking to invest in emerging market companies, excluding China, that are believed to achieve or maintain a dominant position within their respective market. As part of its investment strategy, EMM aims to identify early winners in growing industries, where entrepreneurship can produce long-term global competitiveness. Global X Emerging Markets ex-China ETF holds 71 stocks in its basket, with Taiwan Semiconductor taking the top position at 8.4% share.

Global X Emerging Markets ex-China ETF has AUM of $25.6 million and charges 75 bps in annual fees. It trades in a volume of 4,000 shares a day on average.

Xtrackers Semiconductor Select Equity ETF (CHPS)

Xtrackers Semiconductor Select Equity ETF seeks to track the Solactive Semiconductor ESG Screened Index. It holds 52 stocks, with TSM being the third firm with a 5.2% share. Xtrackers Semiconductor Select Equity ETF charges 15 bps in annual fees and has AUM of $7.2 million. It trades in an average daily volume of 2,000 shares.

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Apple Inc. (AAPL) : Free Stock Analysis Report

NVIDIA Corporation (NVDA) : Free Stock Analysis Report

Taiwan Semiconductor Manufacturing Company Ltd. (TSM) : Free Stock Analysis Report

VanEck Semiconductor ETF (SMH): ETF Research Reports

Global X Emerging Markets ex-China ETF (EMM): ETF Research Reports

Xtrackers Semiconductor Select Equity Etf (CHPS): ETF Research Reports

SP Funds S&P Global Technology ETF (SPTE): ETF Research Reports

SP Funds S&P World (ex-US) ETF (SPWO): ETF Research Reports

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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