U.S. Stock Market Factors to Watch Out on FridayThe frenzy around AI has sent Nvidia and other superstar stocks to dizzying heights, stirring criticism that their prices had shot too high. Nvidia rose 2.1 per cent on Thursday after TSMC’s Chief Financial Officer Wendell Huang said it’s seeing “continued strong demand” in an encouraging signal for the entire AI industry.TSMC’s stock that trades in the United States rose 4.4 per cent on Thursday. Wall Street steadied on Thursday as stocks related to artificia ...

Core Viewpoint - TSMC's recent financial report signifies not just growth but a transformative era driven by AI, marking the onset of the fourth industrial revolution [5][21]. Financial Performance - TSMC reported a net profit of NT$505.7 billion, exceeding expectations of NT$467 billion, with a year-on-year increase of 35% [7]. - The gross margin reached 62.3%, surpassing the anticipated ceiling of 60.6% [8]. - For Q1 2026, TSMC's revenue guidance is set between $34.6 billion and $35.8 billion, significantly above the expected $33.22 billion [15]. - The gross margin guidance for Q1 2026 is projected at 63%-65%, outpacing market expectations of 59.6% [16]. - Capital expenditures for 2026 are expected to reach $52 billion to $56 billion, far exceeding the previous year's $40.9 billion and market expectations of $46 billion [17]. AI and Technology Leadership - TSMC's advanced 3nm, 5nm, and 7nm processes contributed 77% of total revenue, with 3nm and 5nm alone accounting for 63% [12]. - The company anticipates a nearly 30% growth in revenue in 2026, surpassing the 25% market expectation, with a five-year compound annual growth rate (CAGR) of 25% starting in 2024 [24]. - TSMC has raised its CAGR forecast for AI accelerators from 45% to a range of 55%-59% for 2024-2029, indicating a robust growth trajectory [26]. Advanced Packaging Technologies - CoWoS (Chip-on-Wafer-on-Substrate) is TSMC's proprietary advanced packaging technology, with expected monthly production capacity reaching 115,000 pieces by the end of 2026 [30]. - The demand for CoWoS is so high that it has created an overflow capacity of approximately 15,000 pieces per month, benefiting other packaging companies [32]. - CoWoP (Chip-on-Wafer-on-PCB) is a revolutionary technology that bypasses the capacity constraints of ABF substrates, simplifying structure and reducing costs [37][38]. Global Expansion Strategy - TSMC is executing an unprecedented global factory expansion plan, with key sites in Taiwan, the USA, Japan, and Germany, to meet demand and strategically position itself in the geopolitical landscape [58][59][60][61]. - The company is establishing a 2nm core base in Hsinchu and Kaohsiung, which will serve as the heart of its operations [59]. Conclusion - TSMC is not merely a semiconductor company; it is a pivotal player in the evolution of technology and the AI revolution, shaping the future of the global digital economy [63].

Core Viewpoint - The U.S. stock market is experiencing a pre-market rally in technology stocks, with notable gains from major companies such as Micron Technology, AMD, and TSMC [1] Company Performance - Micron Technology saw an increase of over 3% in pre-market trading [1] - AMD experienced a rise of more than 2% [1] - TSMC recorded a gain of over 1% [1]

Report Industry Investment Rating - Not provided in the given content Core Viewpoints of the Report - The upward trend of the stock index remains unchanged, and the adjustment is expected to end in the first half of next week, followed by a resumption of the upward trend. Global funds are re - investing in the Chinese stock market, and the inflow of off - site funds continues, maintaining a capital - driven upward trend. The semiconductor sector is expected to take over from the commercial aerospace sector, with the high - prosperity of the semiconductor equipment sector indicated by TSMC's performance and capital expenditure plans [2][16]. Summary by Relevant Catalogs Stock Market and Index Trends - Policy aims for a slow - bull market, as shown by recent policy regulations. The satellite ETF declined significantly after commercial aerospace - related listed companies announced risks on Monday. The adjustment of the margin trading guarantee ratio led to a sharp decline in the CSI 500 index on Wednesday afternoon [4][7][10]. - TSMC's Q4 performance was strong, with revenue of about $337.3 billion, a 20.5% year - on - year increase, and a net profit up 35% year - on - year and 11.82% quarter - on - quarter. It expects Q1 revenue to increase by 40% year - on - year to $358 billion in 2026, and its dollar revenue to grow by nearly 30%. Capital expenditure is estimated to be $520 - 560 billion, a 27% - 37% increase from 2025, indicating a high - growth trend in the semiconductor sector [13]. - Global funds are re - increasing their investment in the Chinese stock market. Foreign capital is shifting from passive inflows to an expected return of active funds. The RMB is appreciating, accelerating the return of overseas - hoarded dollars of foreign trade enterprises. The inflow of off - site funds continues, and the upward trend driven by market funds remains unchanged. The adjustment is expected to end in the first half of next week, and the stock index will resume its upward trend. Long - term multi - orders for stock index futures should be held, and the CSI 500 and CSI 1000 indices have stronger offensive capabilities. For stock index options, consider buying deep - out - of - the - money call options on the CSI 1000 index with a long - term maturity [16][17]. Macroeconomic Indicators in China - In December, the year - on - year growth rate of the core CPI was 1.2%, and the real interest rate has been negative for consecutive periods, with a 0.2% month - on - month increase. In December, the month - on - month increase of the industrial producer purchase price index was 0.4%, indicating that the Chinese economy is moving towards re - inflation [18][21]. - The balance of margin trading is approaching 2.7 trillion yuan, reaching a new high. In December, there were 2.59 million new A - share accounts opened [23]. - In December, China's export value reached $357.7 billion, a new record, with a year - on - year growth rate of 6.6%, showing export resilience [26]. - In November, the monthly value of manufacturing fixed - asset investment was 2.94 trillion yuan, with a year - on - year growth rate of - 4.4%, indicating a slowdown in manufacturing investment [29]. - In November, the monthly value of infrastructure investment was 2.08 trillion yuan, with a year - on - year growth rate of - 11.9%, indicating a slowdown in infrastructure investment and reflecting local fiscal difficulties [32]. - In November, the year - on - year growth rate of real estate development investment was - 31.3%, reaching a new low [35]. - In November, the monthly value of total social consumer goods retail sales was 4.38 trillion yuan, with a year - on - year growth rate of 1.3%. In the context of expected decline in exports and slowdown in investment, consumption has become the main driving force for economic growth [38]. US Macroeconomic Indicators - The US unemployment rate has risen to 4.6%, and the employment boom has declined, with a rapid increase in the number of voluntary lay - offs by US enterprises [41][44]. - In November, the total retail and food sales in the US increased by 0.6% month - on - month, which may be related to seasonal factors, but overall US consumption has weakened [47]. - In December, the price index of the US manufacturing PMI and the service - sector PMI continued to expand, indicating that the US is moving towards stagflation [50]. International Market Impact - The Bank of Japan raised interest rates by 25 basis points to 0.75%, and the yield of the 10 - year Japanese government bond soared to 2.18%. The large - scale return of yen carry - trade will have a negative impact on US bonds, US stocks, and Chinese bonds [53]. - The accelerating appreciation of the RMB is conducive to the accelerated inflow of international capital into China [56].

Core Viewpoint - TSMC's recent earnings report exceeded market expectations, igniting a new wave of AI-themed market enthusiasm, with a record capital expenditure plan of up to $56 billion by 2026, boosting confidence across the semiconductor industry [1] Group 1: Impressive Earnings - TSMC's Q4 2025 revenue reached approximately $33.7 billion, with a net profit of $16 billion, showing significant year-on-year growth [2] - The gross margin increased to 62.3%, indicating strong pricing power and technological advantages in advanced processes [2] - High-performance computing revenue, including CPU, GPU, and AI acceleration chips, grew significantly, accounting for 55% of total revenue, surpassing smartphone business for the first time [2] - The 3nm and 5nm processes contributed over 60% of revenue, demonstrating the financial returns from technological leadership [2] Group 2: Bold Future Investments - TSMC provided an optimistic revenue growth forecast of nearly 30% for 2026 and raised its capital expenditure plan to $52 billion to $56 billion, a nearly 30% increase from the previous year [3] - This investment decision was made after extensive discussions with major clients like NVIDIA, Apple, and AMD, aimed at addressing confirmed long-term structural demand driven by AI [3] - A significant portion of the capital expenditure (10%-20%) will be allocated to advanced packaging technology to enhance AI chip production capacity [3] Group 3: Industry Chain Revaluation - TSMC's positive outlook has triggered a value reassessment across the semiconductor supply chain, particularly benefiting semiconductor equipment manufacturers [4] - ASML, the sole supplier of extreme ultraviolet lithography machines, saw its market value soar past $500 billion following TSMC's report, becoming one of Europe's highest-valued tech companies [4] - The optimistic sentiment spread to the broader chip sector, with stocks of companies like NVIDIA, AMD, and Micron Technologies rising [4] Group 4: Evolving AI Demand - The underlying logic supporting TSMC and the industry's confidence is the qualitative shift in AI demand, moving from model training to inference needs driven by widespread application [5][6] - As AI transitions from experimental phases to various industries, the demand for computing power is expected to grow exponentially, indicating a more sustainable demand base [6] Group 5: Challenges Ahead - Despite the optimism, there are cautious voices regarding the sustainability of high profitability and capital returns amid geopolitical pressures and cyclical risks [7] - TSMC's $56 billion capital expenditure requires sustained high customer orders over several years to avoid potential overcapacity risks [7] - The high costs of building fabs in regions like the U.S., Japan, and Europe compared to Taiwan pose long-term profitability challenges [7]

Market Overview - The market opened high but closed lower, with the three major indices experiencing slight declines. The semiconductor industry chain saw a surge, with stocks like Tianyue Advanced and Tongfu Microelectronics hitting the daily limit. The robotics sector also performed well, with companies such as Wuzhou Xinchun and Fangzheng Electric reaching their daily limit. In contrast, AI application stocks collectively adjusted, with companies like Yili Media and Vision China hitting the daily limit down. Overall, around 3,000 stocks in the Shanghai and Shenzhen markets declined, with a total transaction volume of 3.06 trillion yuan [1]. Key Sectors Semiconductor Sector - The domestic semiconductor sector experienced a significant increase, with stocks like Shenghui Integrated, Kangqiang Electronics, and Jinhai Tong hitting the daily limit. TSMC reported a 35% year-on-year increase in net profit for Q4, reaching a historical high, and is expected to generate revenue between $34.6 billion and $35.8 billion in Q1 2026, a 38% year-on-year growth [4][5]. Smart Grid Sector - The smart grid concept saw a substantial rise, with stocks such as Senyuan Electric and Hancable hitting the daily limit. The State Grid announced that fixed asset investment during the 14th Five-Year Plan period is expected to reach 4 trillion yuan, a 40% increase compared to the previous plan, aimed at accelerating the construction of new power systems and enhancing transmission capacity by over 30% [7][9]. Robotics Sector - The robotics sector showed strong performance, with stocks like Xinquan Co. and Henghui Security hitting the daily limit. OpenAI is reportedly seeking suppliers for robotics and AI devices, indicating a growing demand in this area [12][14]. Investment Insights - Analysts from Kaiyuan Securities noted that TSMC's acceleration in 2nm production and the release of capacity from U.S. wafer fabs indicate a continued strong demand for advanced processes. TSMC plans to raise wafer foundry prices for four consecutive years from 2026 to 2029, highlighting a clear supply-demand imbalance in the industry [6]. - Huaxin Securities pointed out that the semiconductor industry's prosperity is on the rise, with global semiconductor equipment sales expected to reach $133 billion by 2025, with mainland China leading the market. Domestic wafer foundries are seizing recovery opportunities through counter-cyclical expansion, with SMIC's 8-inch wafer monthly capacity reaching 1.023 million pieces [6]. - The smart grid investment is projected to be around 1 trillion yuan annually during the 14th Five-Year Plan, with significant investments expected from both the State Grid and Southern Grid [9][10].

Core Viewpoint - The semiconductor sector is experiencing significant growth, driven by TSMC's increased capital expenditure and the domestic expansion of wafer fabs in response to a growing demand for advanced manufacturing capabilities [1] Group 1: Market Performance - On January 16, the three major indices initially surged but then retreated, with the Shanghai Composite Index falling by 0.26% to 4101.91 points [1] - Semiconductor concept stocks saw a dramatic rise, with Kede Quartz increasing over 20%, and several other stocks like Tianyue Advanced and Yongxi Electronics hitting the daily limit [1] Group 2: TSMC's Capital Expenditure - TSMC disclosed that its capital expenditure for 2026 is expected to reach between $52 billion and $56 billion, significantly exceeding market expectations [1] - The increase in equipment investment indicates a further expansion of global production capacity over the next two years [1] Group 3: Industry Outlook - CITIC Securities noted that TSMC's record performance in 2025 and the substantial increase in 2026 capital expenditure highlight the ongoing benefits from AI computing power and advanced processes [1] - The domestic wafer fabs are entering a phase of expansion to address a million-piece-level capacity gap, which is expected to create a $100 billion opportunity in the equipment market [1] - There is potential for domestic production rates to double, and CITIC Securities is optimistic about investment opportunities in semiconductor equipment, particularly recommending leading companies with platform capabilities and high-elasticity niche leaders [1]

Group 1 - The core point of the news highlights significant outflows from stock ETFs, exceeding 70 billion, indicating a trend of large funds selling off ETFs, particularly in the context of increased margin requirements [1][10] - The Shanghai Composite Index and other major ETFs continue to experience high trading volumes, with many trading at a discount, suggesting ongoing selling pressure from large investors [1][10] - Regulatory measures have been introduced to curb excessive speculation, particularly in sectors like commercial aerospace and AI applications, making it difficult to replicate previous market frenzies [4] Group 2 - The U.S. Federal Reserve officials expressed a preference to maintain interest rates unchanged in the near term, with potential for moderate rate cuts later in the year, which may impact emerging markets due to a strengthening dollar [6] - Nvidia has revised its data center copper demand estimates significantly downward, indicating a need to adjust expectations for future demand in this sector [9] - The Chinese government has implemented new regulations for the recycling and utilization of used batteries in electric vehicles, effective from April 1, 2026, aiming for comprehensive lifecycle management [13] Group 3 - The semiconductor packaging sector is experiencing a surge in demand, with companies like ASE and others reporting near-full capacity and initiating price increases of nearly 30% due to overwhelming orders [13] - TSMC has raised its capital expenditure forecast for 2026 to between 52 billion and 56 billion USD, up from 40.9 billion USD in 2025, which is seen as a significant opportunity for the SiC industry [14] - The silicon carbide sector has seen substantial stock price increases, with companies like Tianyue Advanced and Sanan Optoelectronics hitting their daily price limits [15] Group 4 - The overall market performance shows a decline in major indices, with the Shanghai Composite Index down by 0.26% and the ChiNext Index down by 0.20%, while trading volume surged to 3 trillion [16] - Sector performance indicates that electronics, automotive, and machinery equipment industries are leading gains, while media, computing, and oil sectors are lagging [16][17]

Index Performance - HSI closed at 26,924, down 0.3% daily and up 5.0% YTD [2] - HSCEI closed at 9,267, down 0.5% daily and up 4.0% YTD [2] - HSCCI closed at 4,154, up 0.4% daily and up 3.4% YTD [2] - MSCI HK closed at 14,490, up 0.3% daily and up 5.9% YTD [2] - MSCI CHINA closed at 87, down 1.0% daily and up 5.0% YTD [2] - FTSE CHINA A50 closed at 15,340, unchanged daily and up 0.2% YTD [2] - CSI 300 closed at 4,751, up 0.2% daily and up 2.6% YTD [2] - TWSE closed at 30,811, down 0.4% daily and up 6.4% YTD [2] - SENSEX closed at 83,628, down 0.3% daily and down 1.9% YTD [2] - NIKKEI 225 closed at 54,111, down 0.4% daily and up 7.5% YTD [2] - KOSPI closed at 4,798, up 1.6% daily and up 13.8% YTD [2] - ASX 200 closed at 8,821, down 0.1% daily and up 1.7% YTD [2] - DJIA closed at 49,442, up 0.6% daily and up 2.9% YTD [2] - S&P 500 closed at 6,944, up 0.3% daily and up 1.4% YTD [2] - FTSE 100 closed at 10,239, up 0.5% daily and up 3.1% YTD [2] Commodity Price Performance - Brent Crude closed at US$64/bbl, down 4.1% daily and up 4.8% YTD [3] - Gold closed at US$4,616/oz, down 0.2% daily and up 6.9% YTD [3] - Copper closed at US$13,189/t, up 0.2% daily and up 6.2% YTD [3] - Aluminum closed at US$3,203/t, down 0.5% daily and up 7.9% YTD [3] - Nickel closed at US$18,495/t, up 5.8% daily and up 12.1% YTD [3] - CH domestic steel rebar 25 closed at RMB3,244/t, up 0.1% daily and up 0.1% YTD [3] - CH domestic high speed wire closed at RMB3,700/t, unchanged daily and up 0.3% YTD [3] - CH domestic hot rolled steel closed at RMB3,287/t, down 0.1% daily and up 0.5% YTD [3] - CH domestic cold rolled steel closed at RMB3,800/t, down 0.1% daily and down 0.1% YTD [3] - BDI closed at 1,608, unchanged daily and down 14.3% YTD [3] Key Macro and Earnings Releases - China's Retail Sales YoY in January 19th actual was 1.3%, higher than the consensus of 1.1% [4] - China's Industrial Production YoY in January 19th actual was 4.8%, lower than the consensus of 5.0% [4] - China's Fixed Assets Ex Rural YTD YoY in January 19th actual was -2.6%, higher than the consensus of -3.1% [4] - China's Property Investment YTD YoY in January 19th actual was -15.9%, higher than the consensus of -16.5% [4] - China's Residential Property Sales YTD YoY in January 19th actual was -11.2% [4] - China's Surveyed Jobless Rate in January 19th actual was 5.1%, lower than the consensus of 5.2% [4] - China's GDP YoY in January 19th actual was 4.8%, higher than the consensus of 4.5% [4] - China's GDP YTD YoY in January 19th actual was 5.2%, higher than the consensus of 5.0% [4] - China's 1-Year Loan Prime Rate on January 20th remained at 3.0% as expected [4] - China's 5-Year Loan Prime Rate on January 20th remained at 3.5% as expected [4] - US PCE Price Index YoY in January 22nd actual was 2.8% [4] - US Core PCE Price Index YoY in January 22nd actual was 2.8%, in line with the consensus [4] - US Personal Income MoM in January 22nd actual was 0.4%, in line with the consensus [4] - US Personal Spending MoM in January 22nd actual was 0.4%, lower than the consensus of 0.5% [4] - US GDP Annualized QoQ in January 22nd actual was 4.3%, in line with the consensus [4] - US S&P Global US Services PMI in January 23rd actual was 52.5%, lower than the consensus of 52.8% [4] - US U. of Mich. Sentiment in January 23rd actual was 54.0%, in line with the consensus [4] - US S&P Global US Manufacturing PMI in January 23rd actual was 51.8%, lower than the consensus of 52.0% [4] - BOJ Target Rate in January 23rd actual was 0.8%, in line with the consensus [4] New Loans and Monetary Policy - In December, new loans reached RMB910bn, down RMB80bn YoY, narrowing the YoY decline from -32.8% in November to -8.1% [6][8] - Corporate short - term, medium - and long - term loans, and bond financing bounced up YoY in December, while household sector credit demand remained sluggish [6][8] - Monetary policymakers announced incremental loosening policies of structural monetary tools and signaled room for further RRR and policy rate cuts [7][8] TSMC - Rating: BUY (TT & ADR). TSMC's 4Q25 EPS was 8% above consensus, and 1Q26 sales/margins are ahead of expectations [9][13] - The 2026 outlook projects sales growing close to 30% YoY with US$52 - 56bn CAPEX [9][13] - Management lifted long - term guidance, targeting 25% / mid - to - high 50s Group / AI sales CAGR (2024 - 29) and a 56% gross margin [10][13] - Target prices are raised to NT$2,420 / US$445 based on 24x 2026 - 27 P/E and a 16% premium [11][14] Li Ning - Rating: HOLD. Li Ning's 4Q25 retail sell - through was down LSD YoY, affected by weak consumer sentiment [15][17] - The full - year 2025 results were in line with guidance, with revenue achieving marginal growth and NPM approaching the upper end of HSD [15][17] - The inflection point may take longer due to athleisure adjustment and Olympic marketing investment lag [16][17] - The current 2025/2026 P/E valuation of 17x/16x appears full [16][17] Uranium Sector - Uranium spot price rose to US$83.5/lb, and major uranium ETFs rallied 22% YTD [18][20] - The White House's proclamation on critical materials may lead to supportive policies for uranium [19][20] - Positive outlook for the uranium sector in 2026, with top pick Kazatomprom, also recommending CGN Mining and Cameco [19][20] CMOC Group - Rating: HOLD. CMOC expects 2025 net profit of RMB20.0 - 20.8bn, up 48 - 54%, and 2025 copper output grew 14% YoY to 741k tonnes [21][23] - 2025 profit was 4 - 8% below forecast, though copper output was 5% above forecast; 2026 copper output target is 6 - 14% above forecast [22][23] - Forecasts and HOLD rating remain unchanged, and the market may react positively to output guidance [22][23]

Core Viewpoint - TSMC is significantly accelerating its expansion plans in the United States, driven by strong confidence in the growing demand for AI chips, with a total investment of $165 billion in the U.S. and a record capital expenditure plan for 2026 reaching up to $56 billion, a 37% increase from 2025 [1][2]. Group 1: Expansion Plans - TSMC has purchased an additional 900 acres of land in Arizona to support its upgraded expansion plans, as the original 1,100 acres was insufficient for the construction of six fabs, two advanced packaging facilities, and a research center [1][2]. - The new land acquisition provides the physical foundation for TSMC's "super-sized fab cluster" in the U.S. [2]. Group 2: Financial Projections - TSMC's capital expenditure midpoint for 2026 is expected to grow by over 30% compared to 2025, reflecting the company's assessment of the sustainability of AI chip demand [2]. - The company anticipates a revenue growth of nearly 30% in 2026, exceeding analyst expectations [1]. Group 3: Manufacturing Progress - TSMC's first U.S. factory has begun mass production, with performance exceeding expectations, achieving yield and technology levels comparable to its leading facilities in Taiwan [3]. - The timeline for the second Arizona factory has been advanced to the second half of 2027, and construction for the third factory will accelerate this year [3]. - TSMC has started the permitting process for a fourth factory, while the most advanced technologies will continue to be developed and scaled in Taiwan [3]. Group 4: Earnings Guidance - TSMC's first-quarter earnings guidance has surpassed market expectations, with projected revenue between $34.6 billion and $35.8 billion, higher than the Bloomberg consensus of $33.22 billion [3]. - The company has provided gross margin and operating margin guidance of 63%-65% and 54%-56%, respectively, significantly above market estimates [3].