TSMC Raised the AI Bar. Wall Street Raised the Deal Bar.
GOOD MORNING, Thursday gave markets two fresh reasons to believe the earnings cycle is still strong. TSMC reported a record fourth-quarter profit, up 35% year over year, and said 2026 revenue could rise nearly 30% as AI demand stays exceptionally strong. U.S. chip stocks rallied. Goldman Sachs and Morgan Stanley also beat expectations as trading and dealmaking surged, showing that capital markets are benefiting from the same risk appetite and AI investment boom. The Dow rose 0.6%, while the S&P 500 and Nasdaq each gained about 0.25%. Oil fell sharply as President Trump softened his tone on Iran. AI demand and deal activity are still doing the heavy lifting. MARKETS | TLDR
TSMCTSMC Just Raised the AI Demand Bar AgainTSMC reported a 35% jump in fourth-quarter profit to a record high, beating forecasts as demand for advanced AI chips remained exceptionally strong. Management said customers and their customers were continuing to send strong demand signals and forecast that 2026 revenue would rise nearly 30% in U.S. dollar terms. The company also signaled that its capacity response is getting larger. TSMC said more U.S. manufacturing capacity is in the works after already committing $100 billion of additional U.S. investment on top of $65 billion previously planned for three Arizona fabs. The company is not simply benefiting from AI demand; it is committing tens of billions to make sure supply can keep up with it. That matters because TSMC sits underneath nearly every major AI infrastructure story. Nvidia, Apple and the hyperscalers all depend on its advanced manufacturing. When TSMC raises both its revenue outlook and capital spending, it tells investors that the AI buildout still has years of physical investment ahead. It also raises the risk that any future slowdown would arrive after an enormous capacity cycle has already been funded. WALL STREETAI Is Feeding Wall Street’s Deal Machine TooGoldman Sachs beat fourth-quarter profit expectations as equity trading revenue reached a record $4.31 billion, fixed-income trading rose 12.5% to $3.11 billion and investment-banking fees climbed 25% to $2.58 billion. Morgan Stanley reported a similar acceleration, with investment-banking revenue rising to $2.41 billion from $1.64 billion a year earlier. The read-through is broader than bank earnings. Global M&A topped $5.1 trillion in 2025, helped by lower rates, stronger equity markets and optimism around AI. Large transactions — including Alphabet’s $32 billion Wiz acquisition and the $56.5 billion Electronic Arts buyout — gave advisory desks more revenue while volatile markets supported trading businesses. That makes Wall Street one of the second-order beneficiaries of the AI investment cycle. The more capital hyperscalers, chipmakers and software companies raise, spend and redeploy through acquisitions, the more fees flow to banks. AI is therefore not only boosting semiconductor revenue; it is also expanding the pool of financing, underwriting and advisory work around the buildout. HEADLINES
UPCOMING
DEEP INSIGTHSTSMC Smashes Forecasts With Record ProfitRead this for the clearest bottom-up confirmation that AI infrastructure demand remains powerful. TSMC’s record profit, nearly 30% 2026 revenue-growth forecast and continued U.S. capacity expansion show that the industry’s largest manufacturer still sees years of strong demand ahead. Goldman Sachs Profit Beats on Record Stock Trading and DealmakingThis is the best read on the capital-markets side of the same cycle. AI optimism is supporting equity valuations, large acquisitions and financing activity, while volatility is lifting trading revenue. The market’s AI boom is creating fee pools far beyond the chip companies at the center of the narrative. |