TSMC steadies chip ship, ECB set to ease

A look at the day ahead in U.S. and global markets

By Mike Dolan, Editor-At-Large, Financial Industry and Financial Markets

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Tech-heavy stock markets are set to breathe a sigh of relief on Thursday as the world's largest chipmaker beat the street and eased gnawing doubts about semiconductor demand worldwide and jitters about the wider artificial intelligence theme.

After a cloudy outlook from Europe's ASML earlier this week sideswiped chip stocks everywhere, Taiwan Semiconductor Manufacturing said on Thursday it expects sustained growth as it reported a forecast-beating 54% jump in profits and soaring demand for chips used in AI.

TSMC logo is seen at TSMC Museum of Innovation in Hsinchu, Taiwan, May 29, 2024. REUTERS/Ann Wang

TSMC, the dominant producer of advanced chips used in AI applications and whose customers include Apple and Nvidia, has become a bellwether for the AI story and its shares jumped 6% in Frankfurt after the earnings report.

Nvidia shares were also up another 2% in out of hours trade.

TSMC is spending billions of dollars building new factories overseas, including $65 billion on three plants in the U.S. state of Arizona, although it has said most manufacturing will remain in Taiwan.

With Wall Street index futures higher again ahead of Thursday's bell, the news from Taiwan may well lift both the S&P500 and Nasdaq back to record highs.

Helped by a strong earnings season so far for the big U.S. investment banks, the wider market raced ahead on Wednesday. The small cap Russell 2000 clocked it best close in almost three years and Dow Jones blue chips set another record close after the index secured a foothold above the 43,000 mark.

Streaming giant Netflix tops the diary later, with investors looking for signs its nascent ad revenue business is accelerating. That's important as it's set to report about 4 million new subscribers - its lowest addition in six quarters following a boom on its password-sharing crackdown.

Netflix shares are up 44% for the year so far.

With the European Central Bank set to deliver its third interest rate cut of the year later on Thursday - its first back-to-back cut in 13 years - the broader interest rate picture was supportive too.

The euro fell to its lowest level since early August against a generally stronger dollar ahead of the ECB decision.

European stocks pushed higher after a shaky week of disappointments from ASML and luxury goods maker LVMH, both hit by wobbling Chinese demand and a brewing trade war between Brussels and Beijing.