Stocks edge higher as TSMC lifts AI sentiment; bank earnings add fuel
US equities bounced Thursday after two down sessions. The Dow gained about 0.6%, the S&P 500 rose 0.3%, and the Nasdaq added nearly 0.3% as investors leaned back into semis and large-cap financials.
Semis lead: TSMC outlook signals durable AI demand
TSMC reported a 35% jump in Q4 profit and flagged plans to ramp 2026 investment to $56 billion, reinforcing expectations for sustained AI infrastructure spend across Big Tech. As a key supplier to Nvidia and Apple, the tone matters - and it showed up in price action.
Shares in TSMC rallied, lifting chip peers including ASML. Nvidia reversed Wednesday's dip to close up more than 2%, with AMD, Broadcom, Micron, and Arm also firmer. The move pushed back on the recent rotation out of megacaps into value.
AI budgets: bigger, and mostly infrastructure
Fresh estimates suggest the capex wave is far from done. Gartner sees global AI spending at about $2.53T in 2026 and $3.33T in 2027, with the bulk earmarked for infrastructure - roughly $1.36T in 2026 and $1.75T in 2027.
Bank of America frames "transition investing" - power generation, data center inputs (copper, aluminum, silver), and defense - as a practical hedge for investors wary of an AI-led drawdown. It's a way to keep AI exposure while reducing reliance on a narrow set of AI winners.
Financials: dealmaking rebound shows up in results
Goldman Sachs and Morgan Stanley posted profit surges on a stronger finish for advisory and capital markets. BlackRock ended 2025 at a record $14T in AUM and beat on earnings. All three stocks advanced, giving the sector a lift.
Energy and metals cool as geopolitical risk eases
Crude sold off on signs the US is stepping back from a military response in Iran. Brent settled near $63.79 and WTI around $59.19, a roughly 4% drop. The message: the geopolitical premium can fade fast, even if headline risk stays high.
Silver pulled back after a sharp, record-setting run. Rare earth and critical minerals traded mixed after a delay in potential US tariffs; some US names slipped while select producers with domestic projects firmed.
Policy watch: hawkish tone from the Kansas City Fed
Kansas City Fed President Jeff Schmid warned inflation is still "too hot" and said cutting rates now could push prices higher. He added current policy may not be "very restrictive," a reminder that rate-cut timing remains uncertain.
Separately, tensions around Fed independence rose with a Justice Department probe and public criticism tied to central bank officials. Fed leadership pushed back, emphasizing policy decisions are grounded in the mandate of price stability and maximum employment.
AI, software, and the shifting narrative
While semis led, not every tech story is clean. Salesforce is down roughly 10% year to date as investors weigh how generative AI may compress software moats and pricing. Expect more dispersion inside tech as budgets tilt to infrastructure and clear productivity wins.
Portfolio takeaways
- AI infrastructure still leads: consider balanced exposure across foundry, lithography, memory, networking, and power.
- Pair AI beta with "transition" hedges: utilities/power, grid upgrades, industrial metals, and defense can cushion factor and policy shocks.
- Banks benefit from deal flow, but watch private credit and tech-linked real estate if an AI drawdown hits (a 40% shock to AI names would have broad credit implications, per recent analysis).
- Energy positioning should stay nimble; risk premium around the Strait of Hormuz can build or unwind quickly.
- Breadth improved in Industrials, Materials, and Energy; don't assume a one-factor market even with AI leadership intact.
Key catalysts to watch
- Guides from semiconductor bellwethers and hyperscalers on AI capex and supply constraints.
- Fed speakers and inflation prints for clues on cut timing and "restrictiveness."
- Ongoing bank earnings for read-through on capital markets and credit quality.
- Oil inventory data and Middle East headlines; any change in the odds of a shipping disruption through Hormuz.
- US policy signals on critical minerals and trade agreements.
Resources
Company materials: TSMC Investor Relations. Policy background: The Fed's dual mandate.
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