Nasdaq 100 Slides as TSMC Results Revives AI Spending Concerns

TSMC branding. Photo by SeongJoon Cho /Bloomberg

Article content

(Bloomberg) — US stocks declined on Thursday as Taiwan Semiconductor Manufacturing Co.’s results failed to boost artificial-intelligence stocks and traders assessed a worsening situation in the Middle East.

Article content

The technology-heavy Nasdaq 100 Index fell 1.4% at 2:29 p.m. in New York, putting the benchmark on track to extend losses from Wednesday’s session. The S&P 500 Index dropped 0.5% in a retreat from the previous session.

Article content

Article content

Article content

TSMC hiked sales and spending projections for the year, signaling its confidence in the demand for chips and data centers holding up through 2027 and beyond. However, American depositary receipts for the firm were down, while peers like Micron Technology Inc., Marvell Technology Inc. and Nvidia Corp. also declined.

Article content

Article content

“We’re seeing another semiconductor stocks decline despite reporting very positive results and guidance,” said Miller Tabak + Co.’s Matt Maley. “Some of this has to do with some higher spending plans, but there is no question that the initial response has been a ‘sell the news’ reaction for TSM.”

Article content

With TSMC’s results, concern around AI — and the capital spending behind it — has been brought back to the forefront. Traders have become more critical over AI this year, rotating out of stocks linked to the technology on the basis that the spending has failed to produce meaningful returns. 

Article content

The Philadelphia Stock Exchange Semiconductor Index fell 4.2%.

Article content

Still, some like Paul Meeks, head of technology research at Freedom Capital Markets, remain optimistic about prospects for the sector.

Article content

Article content

“Fundamentally, these companies have been performing well, and I expect the rest of the AI infrastructure ecosystem, as companies report earnings over the next couple of weeks, to confirm that strength,” he said. “I don’t see any slowdown in AI infrastructure spending until 2028 at the earliest. With the recent correction, many of these stocks are now relatively inexpensive.”

Article content

In geopolitical news, The US intensified strikes against Iran overnight, hitting an oil tanker near the country’s main export terminal as shipping traffic slumped through the critical Strait of Hormuz. 

Article content

“The challenge for Donald Trump will be to prevent a further rise in inflationary pressures and their detrimental effects on the economy, at a time when the situation was beginning to improve in June,” CIC economists including Anne-Lise Cornen wrote in a note to clients.

Article content

Brent crude hovered at around $84.

Article content

Traders also parsed fresh economic data. US retail sales rose modestly in June, dragged down by a drop in gas-station receipts that masked strong gains at some merchants. The report indicated continued resilience in consumer spending heading into the summer months.