TSM Stock Slides Amid Trade Secret Theft, Nvidia’s Earnings Results

Taiwan Semiconductor Manufacturing Company (TSM) faces mounting pressure as shares declined in pre-market trading following news of trade secret theft charges and concerns over Nvidia’s China-related revenue challenges. The world’s largest contract chipmaker is grappling with a high-profile industrial espionage case involving its cutting-edge 2-nanometer technology, while simultaneously dealing with ripple effects from export controls impacting its major customer Nvidia. These developments highlight the strategic vulnerabilities facing Taiwan’s semiconductor industry amid escalating US-China trade tensions and the critical importance of protecting advanced manufacturing technologies that underpin global AI and computing infrastructure.

Trade Secret Theft Rocks TSMC’s Advanced Technology

Taiwanese prosecutors have filed charges against three individuals, including a former TSMC engineer, for allegedly stealing trade secrets related to the company’s most advanced 2-nanometer chip manufacturing process. The case involves Chen, a former TSMC employee who moved to Tokyo Electron’s Taiwan subsidiary, who allegedly used relationships with former colleagues to access classified information. Prosecutors are seeking a 14-year prison sentence for Chen, marking the first case brought under Taiwan’s National Security Act involving theft of core technologies.

The stolen information consisted of 12 pages of classified trade secrets tied to what prosecutors described as “core national key technologies vital to Taiwan’s industrial lifeline.” The alleged theft was designed to help Tokyo Electron, a major equipment supplier to TSMC, compete for contracts in the 2-nanometer etching process. This represents a significant breach of security for TSMC, which maintains strict protocols around its most advanced manufacturing capabilities that give Taiwan its strategic advantage in global semiconductor production.

TSMC has implemented a “zero-tolerance policy” toward trade secret violations and taken disciplinary action against involved personnel, though the company has not disclosed specific details about the compromised technology.

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TSM Shares Dip in Premarket Trading

TSM shares opened at $236.87 and closed at $239.29, up 0.24% during regular trading hours, but dropped to $236.22 in pre-market trading, down 1.29% as of 6:33 AM EDT on Thursday. The stock has delivered strong long-term returns with a 42.34% gain over the past year and an impressive 223.99% return over five years, significantly outperforming Taiwan’s benchmark index. However, the recent developments have created uncertainty around the company’s ability to protect its technological advantages.

Analysts maintain an average price target of $269.76 for TSM, with recommendations ranging from $210 to $306. The company trades at a trailing P/E ratio of 26.17 and maintains strong financial metrics including a 42.48% profit margin and 34.20% return on equity. With a market capitalization of $1.241 trillion, TSMC represents one of the world’s most valuable technology companies, making any threats to its competitive position particularly significant for global markets.

The timing of these challenges is particularly concerning given TSMC’s critical role as the primary manufacturer for leading AI chip companies, including Nvidia and Apple. Any disruption to TSMC’s operations or competitive advantages could have far-reaching implications for the global technology supply chain and the ongoing AI boom.

Disclaimer: The author does not hold or have a position in any securities discussed in the article. All stock prices were quoted at the time of writing.