by Dr. Chris Kacher
Semiconductors supercharge AI
TSMC is capitalizing on the AI boom (HPC now >50% of revenue) and locking in long-term demand from U.S. hyperscalers. Record earnings, 30%+ 2026 growth guidance, and massive U.S. capex — backed by a favorable trade deal — reinforce TSMC’s position as the indispensable foundry for AI leadership, while significantly reducing geopolitical concentration risk through American expansion.
US-Taiwan AI/semiconductor pact locks in $250B investments with tariff caps at 15%, erasing policy fog that's dogged chips/AI trade.
Deal Core: Taiwan commits $250B to US AI/chip factories, backed by Uncle Sam credit guarantees.
Risk Nuked: Semis power AI boom; no more tariff roulette or supply chain roulette. Construction imports duty-free.
Bull Fuel: TSMC +5% pre-news on earnings crush; NVDA/AMD/AMAT ripped. VanEck Semi ETF +2.1% (YTD +6.2%).
Pre-deal, AI earnings faced endless DC noise. Post-deal, guardrails let P/Es breathe. Fewer unknowns = predictable growth = moonshot trajectory. Fewer policy grenades mean more rocket fuel.
Intel (INTC) reported earnings after yesterday's close. Semiconductors have been soaring due to data Center & AI segment growth driven by rising demand for AI servers, storage, and host CPUs. Wall Street was betting that Intel is finally turning the corner in AI/data center demand after years of struggles such as lost share to Nvidia/AMD and foundry delays. Analysts note better supply execution, customer demand pickup, and potential long-term strategic supply deals.
Key Numbers- Q4 Revenue: $13.7 billion (beat guidance high end of $12.8-13.8B, down 4% YoY but above expectations).
- Non-GAAP EPS: $0.15 (beat estimates of ~$0.08-0.10, strong swing from prior losses).
- Gross Margin (non-GAAP): 37.9% (up 140 bps vs guidance, helped by higher revenue and lower inventory reserves, offset by outsourced mix and early 18A ramp).
- Full-Year 2025: Revenue $52.9B (flat YoY), non-GAAP EPS $0.42.
The Good
- Beat on top/bottom line for the 5th straight quarter despite supply constraints.
- AI/data center growth strong (double-digit sequential/YoY in AI PC/server/networking).
- $4.3B operating cash flow, $2.2B adjusted free cash flow.
- Closed $5B Nvidia investment (hybrid products, NVLink integration).
- Progress on 18A (Panther Lake/Core Ultra Series 3 launch), foundry momentum (Nvidia, Microsoft, etc.).
The Ugly (Why the Sell-Off)
- Q1 2026 Guidance: Revenue $11.7-12.7B (midpoint $12.2B, down sharply QoQ, below consensus ~$13B+). Non-GAAP EPS $0.00 (vs prior expectations positive).
- Acute supply constraints in Q1 (prioritizing server/AI over client), gross margin drop to ~34.5%.
- Execution risks still front and center—CEO Lip-Bu Tan called it a "positive step" but acknowledged ongoing supply/ramps as challenges.
Market priced in a lot of turnaround hype (INTC up big in 2025 on foundry/AI bets), so the weak Q1 outlook overshadowed the Q4 beat. Sentiment: "Solid results, but not enough progress fast enough." Analysts were mixed. Some see it as buying opportunity on long-term 18A/foundry story, others worried about margin pressure and delays.
On Greenland
The "Greenland drama" that seems to have ended with a whimper is part of Trump's style. Shock markets then quickly find a resolution that satisfies markets.Historically, the S&P 500 after major geopolitical events was up double digits a year after each event. Only in 2 of 8 cases was the S&P 500 lower:
1) After the 9/11 attacked in 2001 due to the dot-com bubble burst and recession.
2) After the Ukraine invasion due to the aggressive tightening by central banks leading to substantially slower quantitative easing (QE) which has always resulted in lower markets.
Markets have repeatedly shown that political shocks rarely translate into lasting damage to fundamentals.