- TSMC is the latest AI company to learn that a simple beat-and-raise isn't enough for investors anymore.
- The upcoming earnings season will be pivotal for the chipmakers and hyperscalers that have been at odds in the market. Sign up for First Trade, Business Insider's daily markets newsletter.
Stop me if you've heard this one before: An AI-linked company crushed earnings forecasts, but investors were unimpressed, and shares sank anyway. It turns out the market was more focused on the company's extravagant spending plans.
Tough break, right? Well, it's been happening with some regularity, including twice this month already. Taiwanese chipmaker TSMC got its bell rung on Thursday to the tune of a 6% drop in the company's US-listed ADRs.
In a bygone era, TSMC's beat-and-raise would've been catnip for investors. But in this new period of capex skepticism, the raised AI-spending forecast commanded all of their (negative) attention.
The situation showed something that's been true for a while in the market: You'll be punished more for overspending than you'll be rewarded for beating earnings forecasts.
Samsung also found out last week that a company's best may not be enough for investors right now. Record profit and a blistering growth forecast were roundly ignored by traders, who elected to sell the news.
Unfortunately for chip investors more broadly, when one company's earnings disappoint, the whole sector gets hit.
Previously, that wasn't an issue. Chip stocks would regain their head of steam and recover in short order. The problem now is these events are happening with increased frequency, and the group doesn't have time to recover in between.
The result is what you see in the chart below: deep slides for the Philadelphia Semiconductor Index (SOX) and the Roundhill Memory ETF (DRAM) since June 22.
The chart also shows the outperformance of the Magnificent 7 — which contains the market's biggest hyperscalers — over the same period. The takeaway? A multi-month period of dominance for chipmakers versus hyperscalers is unraveling in real time.
But wait, wasn't it the hyperscalers that drew the ire of investors for overspending last quarter? Yes, but judging by these last few episodes, sensitivity to spending increases when valuations get stretched. And there's no more stretched area than chipmakers — particularly in the memory space. Hyperscalers, meanwhile, have lagged.
Those conditions are conducive to a rotation. In this case, it's back to a relative status quo where hyperscalers are king. Two of the biggest gains since June 22? Meta and Microsoft.
The next chapter will be determined by the ongoing second-quarter earnings season, which kicks into high gear for chipmakers and tech more broadly through the end of July and into early August.
Listed below are the key reports to watch in the coming weeks, sorted by date. July 29 in particular is shaping up to be an AI-earnings Super Bowl of sorts. And remember, when you're sifting through the results, nothing else will matter if spending is too high. If it is, look out below.
Chipmakers
- July 23: Intel
- July 28: Seagate
- July 29: Lam Research, SK Hynix, Arm Holdings, Qualcomm
- August 4: AMD
- August 5: SanDisk
Hyperscalers
- July 22: Alphabet
- July 29: Microsoft, Meta
- July 30: Amazon
[Business Insider](https://www.businessinsider.com/tsmc-stock-price-earnings-chipmakers-hyperscalers-q2-earnings-season-preview-2026-7)
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