Taiwan Semi Stuns With Revenue Update
Once again, we are in a holding pattern, waiting for more on trade talks and May CPI data.
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Equity futures are little changed on Tuesday morning, suggesting the market, at least for now, is in a holding pattern.
What we and the rest of the market are waiting for are more details to emerge from U.S.-China trade talks that so far have been categorized as “going well.” Reports indicate President Trump could ease restrictions on selling chips to China if Beijing agreed to speed up the export of rare earth minerals.
While we wait for more on that front, there are no fresh market-moving data points coming later on Tuesday following the morning’s NFIB Business Optimism Index for May. While that report surprised to the upside, with the May index level rising to 98.8 from April’s 95.8 figure, besting the 95.9 market forecast, the net percent of owners expecting better business conditions rose 10 points from April to 25%. That suggests three-quarters of those surveyed see something less than rosy ahead, a signal that capital spending will remain selective at least until we have more clarity on trade and tariffs.
We and the market are also in a holding pattern ahead of tomorrow’s May CPI report, which we discussed in Monday's video. For those who missed that, the market expects the inflation data for the fifth month of the year to tick higher on a sequential basis. Multiple May data reports already received, however, suggest we could see a potentially hotter print versus market expectations. Should that be the outcome we get on Wednesday, we could see the market jostle a bit as investors revisit current Fed rate cut expectations.
We continue to see a scenario in which the Fed underwhelms market rate cut expectations when it publishes its updated set of economic projections on June 18. Remember, because we are in the Fed’s pre-policy meeting blackout period, we have no Fed speakers on tap, which means the market is left to its own devices to interpret the May CPI and PPI reports this week.
TSM May Revenue Stuns
We did receive Taiwan Semiconductor’s TSM May revenue report early on Tuesday morning, and despite the 8% sequential dip, May revenue rose 39.6% year over year, marking its second-highest monthly revenue figure.
April 2025 remains the record keeper, and odds are it benefited from some pull forward in demand given Trump tariff concerns. With that in mind, examining TSM’s revenue on a quarter-to-date basis shows us that AI-related demand remains strong, a positive signal for our positions in Nvidia NVDA and Marvell MRVL. It also helps explain Qualcomm’s QCOM move to acquire Alphawave. Quarter to date, TSM’s revenue is up 44% year over year and 21% sequentially, signaling AI and data center demand remains robust. We see that supporting our Digital Infrastructure model as well as Artificial Intelligence.
We’ll look for more color on end market demand when known Nvidia and Apple AAPL supplier Foxconn FXCOF shares its May revenue report. That should give us an indication of May demand strength for AI, data center and related servers as well as multiple connected devices.
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At the time of publication, TheStreet Pro Portfolio was long NVDA, MRVL, QCOM and AAPL.
