TSMC's downward revision of guidance shakes the industry, leading to a brutal sell-off of semiconductor stocks in the US market.

According to the Zhītōng Finance APP, TSMC (TSM.US) lowered its revenue guidance for 2023 on Thursday, leading to a significant sell-off in the semiconductor industry.

Previously, the global foundry company had projected a year-on-year revenue decline of 10%, with the previous estimate being in the single digits. Wendell Huang, CFO of TSMC, stated that third-quarter revenue is expected to be between $16.7 billion and $17.5 billion, representing a 9.1% increase compared to the midpoint of the range.

TSMC also added that its capital expenditure for 2023 is expected to be at the lower end of the previously guided range of $32 billion to $36 billion.

Furthermore, TSMC announced a delay in the start of production at its new factory in Arizona from 2024 to 2025, partly due to a shortage of skilled workers required for equipment installation.

Following the release of the earnings report, TSMC's stock fell more than 5% on Thursday, dragging down the share prices of chip equipment manufacturers. Applied Materials (AMAT.US) dropped over 5%, KLA Corporation (KLAC.US) dropped over 4%, and Lam Research (LRCX.US) fell nearly 4%. Other semiconductor stocks were not spared either, with AMD (AMD.US) falling over 5%, NXP Semiconductors (NXPI.US) dropping nearly 4%, NVIDIA (NVDA.US) falling over 3%, and Qualcomm (QCOM.US) declining nearly 3%.

AMD is a customer of TSMC. Wolfe Research initiated coverage on AMD with an "outperform" rating. Wolfe Research also expressed optimism for companies that have "strong long-term growth" and potential cyclical improvements, including Qualcomm, Micron Technology (MU.US), Qorvo (QRVO.US), Skyworks Solutions (SWKS.US), NVIDIA, GlobalFoundries (GFS.US), and Marvell Technology (MRVL.US).

Wolfe Research stated that it is most focused on areas that have not yet recovered, including automotive, industrial, and analog.

In addition, Barclays suggested that NVIDIA could revive artificial intelligence trading when it announces its quarterly performance, as the company may issue another very optimistic guidance. NVIDIA is both a customer of TSMC and a competitor of AMD.

Barclays downgraded its rating on Skyworks Solutions, citing a lack of future catalysts for the company.

Barclays analysts also added that Apple's content business is ultimately "unremarkable." Additionally, the Android market remains weak, which could have a negative impact on Qualcomm.