Taiwan Semi Surges, Microsoft Eyes China Exit, I Give an AMD Answer
Let's see how even as China trade hits TSM, demand is still there; how I see Advanced Micro Devices; and MSFT's moving plans.
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"Please, sir, I want some more."
- Fictional character Oliver Twist (Charles Dickens, 1838)
U.S. equities rallied early on Wednesday, then sold off, then rallied again into the closing bell. Overnight, well after midnight here on the east coast of North America, equity index futures caught another bid as Taiwan Semiconductor (TSM) posted better than 39% third-quarter earnings growth on better than 30% third quarter revenue growth.
Benefiting from increased global demand for AI-capable chips, the world's largest wafer fab or "foundry" and Asia's largest tech company by market cap, boosted its guidance for full year revenue growth from the previously issued 30% (July) to the mid-30% range. TSM's high-performance division, which is where GPUs and other chips involving all things AI and 5G are produced, constituted the majority of sales (roughly 57%) for the three-month period. "Advanced" chips. those with sizes of 7-nanometers or smaller made up 74% of the firm's total sales.
CEO CC Wei allowed that uncertainty in regard to U.S. / China trade are actually hurting sales in addressing analysts this morning, but that, "Conviction in the AI megatrend is strengthening. The AI demand actually continues to be very strong, stronger than we thought three months ago."
Taiwan Semiconductor manufactures chips for Apple (AAPL) , Nvidia (NVDA) , Advanced Micro Devices (AMD) , Qualcomm (QCOM) , Broadcom (AVGO) , Amazon (AMZN) , Alphabet (GOOGL) and others.
The Answer Is 'No'
I received several queries on Wednesday asking if Advanced Micro Devices (AMD) had reached my target price. This was in response to AMD's 9.4% rally for the session in response to news that Oracle (ORCL) had announced plans to deploy 50,000 AMD Instinct MI450 GPUs starting in Q3 2026. Those asking, likely missed my Market Recon column, this column from a week ago (Oct. 9) where I increased my target from $234 to $302.
So, yes, AMD has smashed its way through my old target and no, there is now a long way to go to reach our current target. AMD has blasted out of the Inverted head & shoulders pattern of bullish reversal that we showed readers with the $189 pivot. As readers can now readily see for themselves, the stock's key indicators such as Relative Strength and its daily Moving Average Convergence Divergence are now postured as overwhelmingly bullish. Bear in mind that the shares did leave an unfilled gap in their wake that could provide for some forward-looking volatility. The shares closed on Wednesday at a near 38% premium to their own 50-day simple moving average.
Goodbye to You
'Cause baby, it's over now
No need to talk about it
It's not the same
My love for you's just not the same
- Zachary Holt Smith (Scandal), 1982
MSFT to Move Out of China
Nikkei Asia is reporting that Microsoft (MSFT) is aiming to produce the majority of its new products outside of China as early as 2026. Microsoft is said to have been asking suppliers to help prepare it for its "out of China" move. MSFT intends to move production of its Surface laptops and data center servers to include key components and assembly outside of mainland China by next year. Microsoft has been manufacturing its goods in China since 1992.
Nikkei Asia is also reporting that Amazon's (AMZN) AWS is among other U.S. tech companies looking to make a similar move. AWS, according to the story, is considering the feasibility of reducing its sourcing from longtime suppliers inside mainland China as it looks for a new home to manufacture its AI data center servers.
The Above Moves...
Come as Pres. Trump responded, "Well, you're in one now" on Wednesday when asked by a reporter if the world's two largest economies were in for a sustained trade war. The comment came after Treasury Sec. Scott Bessent, who has had a steady hand in trade negotiations throughout, spoke of extending the trade truce between the U.S. and China.
Washington and Beijing have already agreed to a number of 90-day extensions added to the status quo without really coming to an agreement on trade but staving off prohibitively elevated tariffs. Bessent said, "Is it possible that we could go to a longer roll in return? But all that's going to be negotiated in coming weeks."
Bessent suggested that there could be a coordinated response to China's recent moves regarding restrictions on rare earth minerals and metals as well as sanctions on U.S. shipping. The Secretary mentioned that "all my counterparts" are in D.C. for International Monetary Fund and World Bank meetings this week, "We're going to be speaking with our European allies, with Australia, with Canada, with India and the Asian democracies."
As far as the end of month get together between Pres. Trump and his Chinese counterpart, Xi Jinping, Bessent said that as far as he is aware, the president is still "a go," while adding that he may leave for Asia ahead of the president to pave the way.
Marketplace
Odd day. Wednesday. Sort of a rally. Sort of. The S&P 500 gained 0.4% for the session. The Nasdaq Composite gained an even better 0.66%. The small cap indexes gained 0.97% (Russell 2000) and 0.82% (S&P 600) respectively. The Philly Semiconductors soared 2.99% for the day, obviously led by AMD, but equipment providers KLA Corp (KLAC) and Lam Research (LRCX) had great days, too.
The flipside? The Dow Jones Industrials closed in the red (nobody has cared since the 1990s), as both the S&P mid-cap 400 and Dow Transports closed nearly unchanged. Breadth wasn't all that exciting either. Seven of the 11 S&P sector SPDR ETFs closed out the day in the green, but outside of the semis, defensive sectors such as the REITs (XLRE) and the Utilities (XLU) led the way. The Financials (XLF) closed flat and three of these funds ended the day in the red. The bottom five slots on the daily performance tables were all occupied by cyclicals, which is sub-optimal.
Winners beat losers at the NYSE by a rough 5-to-3 margin and at the Nasdaq by a 2-to-2 margin. Advancing volume took a 62.7% share of composite Nasdaq-listed trade and a 58.7% share of composite NYSE-listed activity. Is the threat posed by that Friday sell-off over just yet? Not yet. While aggregate trade across Nasdaq-listed securities was truly higher, up 16.4% on a day-over-day basis, aggregate trade was slightly lower across both NYSE-listings and across the membership of the S&P 500. Hence, we do not have enough visible professional conviction for me to declare a Day One Bullish change in trend. Head on a swivel. Proceed as you were.
No Layoffs
A federal judge, Susan Illston, has issued a restraining order that temporarily blocks the Trump administration from moving ahead with mass layoffs while the federal government is shut down. The administration had sent "reduction in force" notices or RIFs to about 4,000 employees from more than half a dozen agencies. The president had referred to the layoffs as "Democrat-oriented" in an effort to get Senate Democrats to agree to reopen the government.
The shutdown is now in its 16th day. Republican senators have now passed a short-term spending bill that would keep the government function at current levels through Nov. 21 for a ninth time. The bill has some Democratic party support but not enough to get over the required 60 votes out of 100 needed to pass. Democrats are holding out for increased spending on healthcare subsidies.
Just Look...
At all of those Fed speakers below.
Economics
(All Times Eastern)
08:30 - Initial Jobless Claims (Weekly): Three weeks behind.
08:30 - Continuing Claims (Weekly): Three weeks behind.
08:30 - PPI (Sep): Expecting 0.3% m/m, Last -0.1% m/m.
08:30 - Core PPI (Sep): Expecting 0.2% m/m, Last -0.1% m/m.
08:30 - PPI (Sep): Expecting 2.5% y/y, Last 2.6% y/y.
08:30 - Core PPI (Sep): Expecting 2.9% y/y, Last 2.8% y/y.
08:30 - Retail Sales (Sep): Expecting 0.4% m/m, Last 0.6% m/m.
08:30 - Core Retail Sales (Sep): Expecting 0.3% m/m, Last 0.7% m/m.
08:30 - Philadelphia Fed Manufacturing Index (Oct): Expecting 9.1, Last 23.2.
10:00 - Business Inventories (Aug): Expecting 0.1% m/m, Last 0.2% m/m.
The Fed
(All Times Eastern)
08:00 - Speaker: Richmond Fed Pres. Tom Barkin.
09:00 - Speaker: Reserve Board Gov. Michael Barr.
09:00 - Speaker: Reserve Board Gov. Stephen Miran.
09:00 - Speaker: Reserve Board Gov. Christopher Waller.
10:00 - Speaker: Reserve Board Gov. Michelle Bowman.
12:45 p.m. - Speaker: Richmond Fed Pres. Tom Barkin.
4:15 - Speaker: Reserve Board Gov. Stephen Miran.
6:00 - Speaker: Minneapolis Fed Pres. Neel Kashkari.
Today's Earnings Highlights
(Consensus EPS Expectations)
Before the Open: (BK) (1.77), (SCHW) (1.23), (CMCSA) (1.34), (KEY) (.38), MTB (4.39), MMC (1.78), (SNA) (4.65), (TRV) (6.14), (USB) (1.12)
After the Close: (CSX) (.43)
At the time of publication, Guilfoyle was long KEY, NVDA, AMD, GOOGL, MSFT. LRCX equity.
