Why Taiwan Semiconductor Stock Tumbled Today

Key Points

• The U.S. government wants to take a 10% stake in Intel.

• It also wants to convert the free grant money that it already promised Intel into payment for Intel shares.

• The government may do the same thing to TSMC.

• 10 stocks we like better than Taiwan Semiconductor Manufacturing ›

Contract semiconductor manufacturer Taiwan Semiconductor Manufacturing (NYSE: TSM) stock slid 2.2% through 12:22 p.m. ET Wednesday. Why? As you may have heard by now, President Trump is planning to take an equity stake in Intel (NASDAQ: INTC).

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All the cool kids are doing it

Following passage of the Biden administration's CHIPS Act supporting the U.S. semiconductor industry, Intel was awarded $10.9 billion in grants. But as Bloomberg reports, the Trump White House is now negotiating with Intel to convert those grants into a 10% stake in Intel stock.

But Intel wasn't alone in winning CHIPS Act grants. As CNBC points out, Taiwan Semiconductor (TSMC) was awarded $6.6 billion in U.S. government semiconductor subsidies. And now it seems U.S. Commerce Secretary Howard Lutnick may want to convert that grant into an equity stake as well.

What does this mean for Taiwan Semiconductor Manufacturing stock?

That's the question investors are pondering today: What does this mean for TSMC?

If Commerce converts its $6.6 billion grant into a $6.6 billion investment in TSMC stock, it will effectively remove $6.6 billion in "free money" from TSMC's balance sheet. But TSMC would still get to keep the $6.6 billion -- in exchange for handing shares over to the government. It might also be better positioned to win further government subsidies.

But what if the rumors prove false? What if the government invests only in Intel, and not in TSMC? That would seem to give the government a big incentive to make sure Intel "wins" the semiconductor market, perhaps at TSMC's expense.

This is bad news for TSMC.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intel and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: short August 2025 $24 calls on Intel. The Motley Fool has a disclosure policy.