Q3 earnings season in Wall Street will kick off in earnest this week, as the big banks will begin reporting their quarterly results starting tomorrow. While that will hog some of the spotlight in the stock market, the AI boom continues to be one of the more closely watched themes. As such, I would pick TSMC as the stock to pay attention to in terms of earnings releases in the days ahead.
The big question now among investors with regards to the AI boom is whether all the spending on chips and data centers can keep going.
So, TSMC might offer a better idea of that when they report their earnings on Thursday, 15 October. As a reminder, TSMC is one of the biggest chip manufacturers in the world and plays a crucial role in the AI supply chain. Nvidia might be the more familiar household name as they design powerful chips needed to run AI applications, but someone still has to manufacture them. And that is where TSMC comes in.
Analysts are expecting EPS of around $4.42 for its US-listed shares, with net profit projected to surge roughly 65% to NT$746.3 billion.
Now, TSMC has already enjoyed a rather impressive quarter. The firm reported record revenue of NT$1.49 trillion ($46.7 billion), which is up 50% from a year ago and beating market expectations of NT$1.46 trillion. But with expectations already running so high, I would argue that it is definitely a very tall order to impress investors further from this point. In other words, investors might be looking for more than just another record-breaking quarter to be satisfied.
As such, there will be watchful eyes on whether TSMC can keep this momentum up heading into 2027. What the firm says about AI chip demand and whether customers are still looking to ramp up orders might be more important than the headline numbers themselves.
But before we even get to TSMC’s earnings this week, there is also the broader market picture to consider.
The US CPI report on Wednesday will arguably be the bigger key risk event for markets this week. And with Treasury yields staying elevated, another hot inflation reading could put further pressure on tech stocks – regardless of how well TSMC performs.
Taking that into account, I reckon an upbeat outlook from TSMC could still offer some reassurance that the AI boom has room to run. However, whether that will be enough to keep AI stocks rallying is another question altogether.
I mean, investors are already paying a hefty premium for AI-related stocks. So, they might not have that much appetite to keep paying such high prices if inflation worries and rising bond yields continue to weigh on broader market sentiment.
This article was written by Justin Low at investinglive.com.
