Chips Stocks React to Ukraine Invasion

Semiconductor stocks did well on Thursday—with one big exception.

Russia's invasion of Ukraine seemed to weigh on Taiwan Semiconductor Manufacturing shares, which were on track for their worst day since 2020 before paring losses to close down 3.5%. The PHLX Semiconductor Index, known as the Sox, rose 3.5%. Advanced Micro Devices and Nvidia jumped more than 6%. GlobalFoundries, a key U.S. chip manufacturer, surged 14%.

Wedbush Securities analyst Matthew Bryson told me via email that GlobalFoundries' gains and declines for shares of Taiwan-based firms United Microelectronics and TSMC might say something about the markets' response to Ukraine. I wrote about it here:

“I think it’s very difficult to explain GFS’s (and to some extent INTC’s) gains today in contrast to the pressure both UMC and TSM are seeing without assuming the market is extrapolating Russia’s invasion of Ukraine as signaling additional risk around Taiwanese/Chinese relations and Taiwanese assets,” Bryson says.

Reuters also reported Thursday that Taiwan warned nine Chinese aircraft that entered its air defense zone, though Bryson notes that China’s air force flying into Taiwan’s space has been a somewhat common occurrence recently.

That doesn't mean Xi Jinping will take a page out of Vladimir Putin's playbook. As Bryson notes, the Ukraine situation features key differences from any tension between Taiwan and China.

“The latter share a land border, Ukraine is less vital to the world economy, and Putin seemingly acts abruptly,” he says. “In contrast Taiwan is an island (making an invasion far more difficult logistic, its semiconductors are irreplaceable today (so it’s far more important to the West economically), and China tends to play the long game.”

While the U.S.'s response to Ukraine may worry some, President Joe Biden has said Taiwan has a commitment from the U.S. that it will defend the island if China chose to attack.