Taiwan Semiconductor dips on China concerns even as US chip stocks trade mixed
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Taiwan Semiconductor (NYSE:TSM) shares fell nearly 4% on Monday following a huge drop in Chinese stocks amid concerns that Chinese President Xi Jinping's grip on power will lead to more restrictions.
In addition, Bloomberg reported that Taiwan Semiconductor (TSM), the world's largest semiconductor foundry, had suspended work for Chinese startup Biren Technology as it seeks to determine whether the company is in the crosshairs of the Biden Administration's new controls on the Chinese semiconductor industry. 
Biren Technology competes with Nvidia (NVDA) and Advanced Micro Devices (AMD) in GPUs. Nvidia (NVDA) finished the session with a 1% gain, while AMD (AMD) fell fractionally. 
Earlier this month, it was reported that Taiwan Semiconductor (TSM) and Samsung (OTCPK:SSNLF), among others, had received a one-year reprieve from the new export controls.
Despite the bad news surrounding Taiwan Semiconductor (TSM), the U.S. chip sector was largely mixed on Monday, aided in part by Bank of America reiterating its buy rating on semiconductor equipment companies.
Bank of America reiterated its buy rating on KLA Corp. (NASDAQ:KLAC), Applied Materials (NASDAQ:AMAT) and Lam Research (NASDAQ:LRCX), citing optimism from Lam Research's recent third-quarter results and optimism surrounding the CHIPS Act.
Analyst Vivek Arya noted that even with risks relating to the export controls to China and the ongoing weakening to the semiconductor cycle, capital equipment companies should benefit from some long-term tailwinds. 
"We expect [wafer fab equipment] intensity to dip to 13.4% in 2023 (China restrictions), but then recover to 14% in 2024 (benefits of CHIPS Act + cycle recovery), and eventually head back towards its 15-17% range of 2021 and 2022 as equipment demand is redirected to other geographies/customers," Arya wrote in a note to clients. 
Looking ahead, Arya expects the sector to recover from the restrictions as the last set of China restrictions were focused on Huawei and they were "fully absorbed" in two to three years. As such, there could be a boost in wafer fab equipment spending to be between $90B and $100B by 2025, assuming no "major" demand destruction from the ongoing spat between the U.S. and China. 
Additionally, there is roughly $100B in government spending from both the U.S. and Europe through 2030, as well as $10B from Japan and Korea's investment tax credits that could help replace or redirect the lost $5B to $7B in wafer fab equipment spending demand.
Applied Materials (AMAT) tacked on more than 3% on Monday, while Lam Research (LRCX) and KLA Corp. (KLAC) rose more than 1.5% each.
Other semiconductor stocks were mixed on Monday, with Intel (INTC), Qualcomm (QCOM) and Broadcom (AVGO) seeing small gains. Conversely, ON Semiconductor (ON), Analog Devices (ADI) and NXP Semiconductors (NXPI) fell on Monday, as investment firm Barclays downgraded both Analog Devices (ADI) and NXP Semiconductors (NXPI), amid ratings changes to several other chip companies.
As part of its rating changes, Barclays upgraded Texas Instruments (TXN), while also downgrading Qorvo (QRVO) and Silicon Laboratories (SLAB).
Separately on Monday, J.P. Morgan upgraded Wolfspeed (WOLF) ahead of its analyst day, set for October 31.
Last week, it was reported that Taiwan Semiconductor (TSM) is discussing an expansion into Japan as it looks to reduce geopolitical risk amid rising Sino-American tensions.