Why Taiwan Semiconductor Manufacturing Stock Is Sinking Today

The stock of Taiwan Semiconductor Manufacturing (NYSE: TSM) is seeing a substantial sell-off Monday in response to multiple bearish catalysts. The company's share price was down 2.7% as of 2:45 p.m. ET today amid the trading backdrop of a 3.1% decline for the S&P 500 index.

TSMC stock is heading lower in conjunction with bearish momentum for the broader market today after President Donald Trump ramped up his criticism of Federal Reserve Chairman Jerome Powell. Unfolding developments in the trade war and the tech race between the U.S. and China are also pressuring the company's valuation.

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TSMC stock slumps as Trump takes aim at the Fed

Stocks are broadly heading lower today, and recent comments from President Trump about the Federal Reserve and Powell are playing a substantial role in the sell-off. In comments this morning, Trump called Powell a "major loser" and said that the Fed should lower interest rates immediately to prevent the U.S. economy from slowing. Investors are having a negative reaction to the possibility that the Trump administration will try to fire Powell before his term as Fed chair concludes in 2026.

TSMC comments on Huawei and AI in China

In the annual report that it published last week, TSMC said that it has limited visibility when it comes to semiconductors that it manufactures eventually being used by Chinese customers. The U.S. has opened a probe into chips produced by TSMC being used in Huawei's technologies, and it's trying to get the semiconductor foundry leader to take more responsibility for where its advanced artificial intelligence (AI) and telecommunications chips wind up.

In addition to export bans preventing some high-end AI chips and semiconductor manufacturing equipment from being sold to China, the U.S. specifically prevents technologies from being sold to Huawei.

As the world's leading contract chip manufacturer, TSMC is at the heart of the technological and broader geopolitical competition between the U.S. and China. So while the company looks poised to benefit from strong demand for chip fabrication services, unfavorable regulatory and national security dynamics are large risk factors for the stock.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.