It’s symbolic that bullish news for artificial intelligence stocks comes amid a vacuum of official data because of the government shutdown. That’s giving more reason for investors to just shrug off economic risks and bet on AI.
A trade
war is harder to ignore.
TSMC, the Taiwanese semiconductor manufacturer, posted blowout quarterly results, with profit soaring and an increased revenue forecast amid demand from AI. It comes hot on the heels of an upbeat outlook from chipmaking equipment group ASML on Wednesday.
Together these two stocks are the picks and shovels of the AI rally. Concrete good news from them is harder to cast off as market exuberance.
With few clues about the Federal Reserve’s path forward on interest rates due to the data blackout, the AI rally has taken the spotlight. But a trade war is more glaring than an opaque economic backdrop.
“We’re in one now,” President Donald Trump said late Wednesday of a U.S.-China trade war, darkening the picture for relations between Washington and Beijing that have already rocked the market this week.
China’s curb on rare-earth exports will affect the chip makers underpinning AI. It should be noted that TSMC, too, is already a pawn in Trump’s trade game with the chip maker investing heavily in U.S. factories as the White House looks to boost U.S. semiconductor production and reduce reliance on imports.
Along with valuations that keep stretching, the case for AI caution is growing stronger. Yet investors betting against tech have been burned repeatedly.
And while most economic data are absent, there are other pleasing fundamental signals. Bank earnings show Wall Street is chugging along and the latest whispers out of the Fed suggest interest rates will keep going down. Intel earnings next week may be another catalyst for tech bets.
It will take more than Trump’s latest comments to blunt AI optimism.
—Jack Denton
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Taiwan Semi Raises Guidance, Soothing Fears of an AI Bubble
What artificial intelligence bubble? Taiwan Semiconductor, the dominant
manufacturer of the chips being used to power the technology, just raised its revenue guidance on the back of AI strength.
- TSMC now expects
revenue growth this year in the mid range of between 30% and 40%. The company previously guided for annual revenue growth of 30% in U.S. dollar terms. The Taiwanese company, crucial to the AI boom, also posted earnings that easily beat Wall Street expectations.
- TSMC reported record third-quarter net profit of 452.30 billion New Taiwan dollars, or $14.77 billion, up 39% from the same period a year earlier. That was ahead of analysts’ expectations of NT$410.58 billion.
- While some analysts have raised concerns about circular financing deals such as that struck between ChatGPT-developer OpenAI and Nvidia creating the risk of a bubble in AI investment, TSMC shrugged off such worries and said demand was growing exponentially.
What’s Next: TSMC Chief Executive C.C. Wei told analysts Thursday that the AI megatrend is strengthening and he believes demand for semiconductors will continue to be fundamental for AI applications.
—Adam Clark
Federal
Judge Blocks Trump Administration’s Shutdown Layoffs
A federal judge has dealt the Trump administration at least a temporary blow, blocking the government from issuing or implementing shutdown-induced layoffs of
federal workers. That includes the reductions in force announced by budget director Russell Vought last week.
- Some 4,000 federal employees have received reduction in force notices, and Vought said during a podcast interview on Wednesday that ultimately that number could exceed 10,000. But federal Judge Susan Illston of
Northern California District Court granted the unions a temporary restraining order.
- The ruling is only applicable to agencies with affected staff who are represented by the unions that filed the lawsuit, and it pauses the 60-day clock on the prior RIF notices. The unions argued the government acted in an “arbitrary and capricious manner.”
- The government argued during the hearing that the court doesn’t have jurisdiction and that the plaintiffs failed to show irreparable harm since the layoffs do not go into effect for 60 days and some might not happen at all. But the judge said the merits were troublesome.
- Danielle Leonard, the lawyer representing the labor unions in the case, cited “the emotional distress of being told that you’re being fired” as an example of harm caused. “It is traumatic. It is distressing.” The order is in effect for at least two weeks.
What’s Next: President Donald Trump is battling in the courts on multiple fronts. The administration’s arguments in favor of the sweeping country-specific tariffs it imposed under emergency powers are set for Nov. 5. Trump said Wednesday he might attend.
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