TSMC's Strong Earnings Sparked a Tech Stock Rally Thursday. What Does It Mean for the AI Trade?

Core Insights - Taiwan Semiconductor Manufacturing Co. (TSMC) reported record quarterly profit of 505 billion new Taiwan dollars ($16 billion) and revenue exceeding NT$1 trillion ($33.1 billion), surpassing Wall Street estimates, which led to a more than 5% increase in TSMC's U.S.-listed shares [1][2] - TSMC's forecast to increase spending on equipment and infrastructure by at least 25% this year positively impacted shares of chipmaking equipment providers like Applied Materials and KLA Corp., which rose by 7% and 8% respectively [2][4] - The strong earnings from TSMC indicate robust demand for AI chips, benefiting companies like Nvidia, Advanced Micro Devices, and Broadcom, while also highlighting a shift in Wall Street's focus towards companies demonstrating tangible financial benefits from AI investments [4][6] Industry Implications - The AI trade faced skepticism in late 2025, but TSMC's results have renewed confidence in companies involved in AI data center buildouts, including chip designers and data storage device makers [3][4] - The semiconductor sector has seen a significant divide, with the PHLX Semiconductor Index (SOX) up 12% year-to-date, driven by companies like Micron and Lam Research, while data storage maker Sandisk's shares have surged approximately 70% due to high demand for AI-related storage solutions [6][7] - Concerns regarding AI monetization have negatively impacted shares of software giants like Intuit, ServiceNow, and Adobe, as investors worry about their ability to compete with AI-native companies and adapt pricing models [7]