Chip stocks buck broader market drop on report of TSMC’s capex boost

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Chip stocks resisted Monday’s rout in the broader market following a report that a major chip manufacturer will be boosting its capital spending in 2021 to address a new generation of products.

Taiwan Semiconductor Manufacturing Co.
TSM,
+2.55%

is reportedly going to announce a 2021 capital expenditure plan of $22 billion, about 10% higher than previously estimated, at an event on Thursday, according to Taiwanese media reports. TSMC acts as a manufacturer for major chip companies like Advanced Micro Devices Inc.
AMD,
+0.03%

and Nvidia Corp.
NVDA,
+0.61%

that do not have their own fabrication plants.

U.S. traded shares of TSMC rose 2.8% Monday, while the PHLX Semiconductor Index
SOX,
-0.73%

was down 0.3%, compared with a 1.7% declines in the both the S&P 500 index
SPX,
-1.85%

and tech-heavy Nasdaq Composite Index
COMP,
-1.73%
.

TSMC’s capital expenditure boost is expected to support the company’s expansion into 5 nanometer chips as well as developing the capacity for even smaller architectures. Currently, companies like AMD have recently introduced 7-nm chips, while other companies like Intel Corp.
INTC,
-0.24%

have struggled to catch up. In chip parlance, nanometers, or nm, refers to the size of the transistors that go on a computer chip, with the general rule being that smaller transistors are faster and more efficient in using power.

Notably, companies that supply the materials and make the equipment that manufacturers like TSMC use saw their shares rise on Monday. Lam Research Corp.
LRCX,
+0.91%

shares rose 2%, KLA Corp.
KLAC,
-0.02%

shares advanced 0.6%, Applied Materials Inc.
AMAT,
+0.21%

shares rose 1.3% and U.S. shares of ASML Holding NV
ASML,
+1.77%

gained 2.1%.

Meanwhile, AMD shares gained 0.3%, Nvidia’s stock rose 0.7%, and Intel shares gained 0.5%.



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