Taiwan shares end down as AI-related stocks under pressure

Taipei, June 4 (CNA) Shares in Taiwan closed lower Tuesday with stocks related to artificial intelligence (AI) under pressure as investors locked in profits built a session earlier, dealers said.

The Taiex, the Taiwan Stock Exchange's (TWSE) weighted index, ended down 180.14 points, or 0.84 percent, at 21,356.62 after moving between 21,308.97 and 21,529.98. Turnover totaled NT$441.96 billion (US$13.64 billion).

The market opened down 0.11 percent and selling increased with AI-related stocks, in particular in the downstream electronics segment, in focus to push down the Taiex by more than 220 points at one point, dealers said.

Along with pressure on nontech stocks, the bellwether electronics sector led the downturn on the broader market until the end of the session, eroding around half of the gains seen a session earlier, when the Taiex soared 362.54 points, or 1.71 percent, dealers added.

"Yesterday's surge largely came from AI frenzy boosted by Jensen Huang (CEO of U.S.-based AI chip designer Nvidia Corp.)," Cathay Futures Consultant analyst Tsai Ming-han said.

In a speech on Sunday, Huang, who is currently in Taipei to attend Computex 2024, described AI as the driving force of a new worldwide industrial revolution.

"Today, investors simply pocketed their gains but I think the losses were technical in nature since the local economic fundamentals are still improving on the back of emerging technologies like AI," Tsai said, referring to the local purchasing managers' index (PMI) returned to expansion in May, ending 14 months of contraction.

Tsai said heavyweight AI device suppliers in the downstream segment encountered more apparent downward pressure Tuesday after their strong showing on Monday after Huang's remarks.

Among them, iPhone assembler Hon Hai Precision Industry Co., which also rolls out AI servers and has expected sales of its AI servers will grow more than 40 percent in 2024, lost 3.12 percent to close at NT$171.00.

Meanwhile, Quanta Computer Inc., another AI server maker, fell 2.65 percent to end at NT$275.00, and rival Wistron Corp. dropped 1.32 percent to close at NT$112.50, while Giga-Byte Technology Co., a leading graphics card vendor for AI applications, shed 2.63 percent to end at NT$315.00.

PC brands Asustek Computer Inc. and Acer Inc., which have unveiled AI PCs, also lost 2.55 percent and 2.48 percent, respectively, to close at NT$496.00 and NT$51.20.

In the semiconductor industry, smartphone IC designer MediaTek Inc., which is also one of Nvidia's partners, lost 2.36 percent to close at NT$1,240.00. In addition, contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), which is believed to provide advanced chips for the production of Nvidia's AI graphics processing units, lost 0.83 percent to end at NT$839.00.

"Compared with other large-cap AI-related stocks, TSMC appeared resilient as investors remained upbeat about its business outlook. Otherwise, the Taiex would have fallen further today," Tsai said.

The electronics index fell 1.04 percent with the semiconductor and computer/peripheral subindex falling 0.93 percent and 1.76 percent, respectively.

"When the Taiex faced headwinds, it was no surprise that many non-tech stocks came under pressure as investors locked their gains a session earlier," Tsai said.

In the transportation industry, which fell 1.18 percent Tuesday after a 1.73 percent rise Monday, Evergreen Marine Corp., the largest container cargo shipper in Taiwan, lost 2.09 percent to close at NT$211.00, and rival Wan Hai Lines Ltd. shed 2.44 percent to end at NT$80.00.

Selling spread to bulk cargo shippers with U-Ming Transport Corp. down 2.02 percent to close at NT$58.20 and Sincere Navigation Corp. down 2.82 percent to end at NT$31.05.

Elsewhere in the old economy sector, Formosa Plastics Corp. fell 1.85 percent to close at NT$63.70 and Nan Ya Plastics Corp. lost 0.96 percent to end at NT$51.70.

Bucking the downturn, Shihlin Electric & Engineering Corp. gained 0.65 percent to close at NT$232.00, and Chung-Hsin Electric & Machinery Manufacturing Co. ended up 0.65 percent at NT$167.50 amid optimism toward their growth due to the government's massive investments to upgrade electricity grid networks nationwide.

In the financial sector, which lost 0.59 percent, Fubon Financial Holding Co. fell 0.27 percent to close at NT$73.60, Cathay Financial Holding Co. dropped 0.53 percent to end at NT$56.40, and E. Sun Financial Holding Co. closed 0.87 percent lower at NT$28.35.

"In addition to technical factors, today's losses came as investors' sentiment has turned cautious about market liquidity ahead of the decisions made by the major central banks in the world later in the month on whether to start to cut interest rates," Tsai said, referring to the European Central Bank's meeting later this week and the U.S. Federal Reserve's next week.

"So, it is possible that the Taiex will continue to move in a narrow range between 21,275 (20-day moving average) and 21,500 (five-day moving average) over the next few sessions," Tsai added.

According to the TWSE, foreign institutional investors sold a net NT$23.56 billion worth of shares on the main board Tuesday.