Shares of the world's largest contract chipmaker fell as much as 4.5% in Taipei after it raised its spending and revenue projections for this year. While the results were largely seen as positive, some analysts and investors highlighted worries over rising costs in addition to fatigue over the yearslong AI boom.

A Bloomberg index of Asian chip stocks tumbled more than 5%, driving it down about 19% from its June peak. Losses on Friday were led by Kioxia Holdings Corp., a Japanese flash memory maker whose shares are still up about 400% on the year despite losing half of their value in recent weeks.

Stocks falling in the wake of good results "means the market is looking to rotate out of chips and in to other things at least for now," said Leonid Mironov, a portfolio manager at Gavekal Capital Ltd. "Also the multiples have gotten stretched, so Kioxia going down 50% doesn't even make it cheap yet" he added.

TSMC, the key maker of Nvidia Corp. chips, now expects to spend $60 billion to $64 billion in 2026, at least $4 billion higher than previously forecast. Typically, higher capex would be seen as good news, especially for the recipients of that spending. But even big TSMC suppliers including Japan's Lasertec Corp. and Taiwan's Globalwafers Co. dropped in the wake of the results.

Morgan Stanley attributed the additional spending partly to cost inflation from higher equipment prices, noting some disappointment over the negative impact on TSMC's margins.

Others point to overheating and inflated valuations, with TSMC's shares still up more than 50% on the year. The stock is trading at around 20 times forward earnings estimates, compared with the five-year average of 18 times.

"The selloff may suggest that sentiment toward chip stocks is shifting following their sizable year-to-date rally, with some investors questioning whether current valuations leave sufficient room for further upside, even in the face of solid earnings," said James Ooi, market strategist at Tiger Brokers.