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Shares fall 4% in Taipei

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Analysts expect second-quarter profit of T$238.8 bln

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Company said last week Q2 revenue jumped, beating market

view

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Earnings call at 0600 GMT on Thursday

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TSMC to update on outlook for current quarter, full year

(Adds analyst comment in paragraphs 4, 5)

By Ben Blanchard and Faith Hung

TAIPEI, July 18 (Reuters) - TSMC, the dominant

maker of chips used in artificial intelligence (AI)

applications, is expected to report another strong quarterly

earnings on Thursday but its Taipei shares slid 4%, pressured by

comments from Donald Trump on Taiwan.

While TSMC's stock - and the broader Taiwan market -

has reached record highs, it began slumping on Wednesday after

Trump, the Republican U.S. presidential candidate, said Taiwan

"did take about 100% of our chip business" and should pay the

U.S. for its defence.

TSMC's American Depository Receipts slid 8% on

Wednesday, though it is expected to report a 30% leap in second-

quarter profit later on Thursday. The broader Taiwan market

was down 2% early on Thursday.

"Trump's comments may have a political impact but will not

alter the market fundamentals," said James Huang, chairman of

Taipei-based Franklin Templeton SinoAm Securities Investment

Management.

"Major companies are still very optimistic about AI and

investing heavily in AI. We don't see Trump's remarks changing

that," Huang added.

Taiwan Semiconductor Manufacturing Co ( TSM ) , the world's

largest contract chipmaker, whose customers include Apple ( AAPL )

and Nvidia ( NVDA ), has benefited from a surge towards

adoption of AI.

TSMC is set to report a net profit of T$238.8 billion

($7.33 billion) for the quarter ended June 30, according to an

LSEG SmartEstimate drawn from 21 analysts. SmartEstimates give

greater weighting to forecasts from analysts who are more

consistently accurate.

That estimate compares with the 2023 second-quarter net

profit of T$181.8 billion.

TSMC reported last week a jump in Taiwan-dollar denominated

second-quarter revenue, comfortably beating market expectations.

It will give third-quarter revenue guidance in U.S. dollars.

On Wednesday, shares in ASML, the biggest supplier

of computer chip- making equipment for whom TSMC is a major

customer, fell sharply on worries that pressure from the U.S.

government could lead to tighter restrictions on its exports to

China.

The investor concerns overshadowed second-quarter earnings

at Europe's largest technology company that beat forecasts.

PEAK SEASON

TSMC, during its quarterly earnings call starting at 0600

GMT on Thursday, will update its outlook for the current quarter

as well as for the full year, including its capital expenditure,

as it races to expand production.

TSMC is spending billions of dollars building new factories

overseas, including $65 billion on three plants in the U.S.

state of Arizona, though it has said most manufacturing will

remain in Taiwan.

On its last earnings call in April, TSMC maintained its

guidance for capital spending this year at $28 billion to $32

billion, compared with last year's $30.45 billion, and said 70%

to 80% of the total would go towards advanced technologies.

The second half of the year is traditionally the peak season

for Taiwanese tech companies as they race to supply customers

ahead of the year-end holiday season in major Western markets.

The AI boom has helped drive up the price of shares in

Asia's most valuable publicly listed company, with TSMC's

Taipei-listed stock leaping 68% so far this year compared with a

30% gain for the broader market.

TSMC, colloquially referred to in Taiwan as the "sacred

mountain protecting the country" for its critical role in

Taiwan's export-dependent economy, faces little competition,

though both Intel ( INTC ) and Samsung are trying to

challenge its dominance.

($1 = 32.5700 Taiwan dollars)

(Reporting by Ben Blanchard and Faith Hung; Editing by

Christopher Cushing and Muralikumar Anantharaman)