Dow, S&P 500, Nasdaq rise as TSMC’s stellar earnings eclipse trade-war jitters

There’s a growing fear on Wall Street of an AI hype-fueled market bubble. The argument is that valuations are stretched as tech stocks become intertwined through a tangled web of circular investments linking them more closely to the success of OpenAI (OPAI.PVT), which has yet to turn a profit.

OpenAI has promised to deliver billions in revenue to cloud providers, chipmakers, and data center companies as it works to bring online more than 26 gigawatts of computing power in the next several years — enough power to provide electricity to more than 20 million homes — that would help train and run its next-generation AI models.

And those promises have helped fuel broader optimism about future demand for AI chips and cloud services.

But Wall Street analysts Vivek Arya of Bank of America and Gil Luria of DA Davidson told Yahoo Finance in interviews that fears of a bubble could be overdone because at least some parts of the market aren’t fully pricing in OpenAI’s success in achieving its goals. In other words, if OpenAI doesn’t do everything it says it will, stocks may not crash as badly as some analysts fear.

DA Davidson’s Luria pointed to Oracle (ORCL) stock as an example. Oracle shares surged as much as 43% and traded as high as $345 when the cloud company revealed a backlog of massive AI contracts during its latest earnings report. However, the stock dropped to as low as $292 in the two days following a Wall Street Journal report that revealed OpenAI was responsible for the vast majority of that backlog.

“So that tells you the market has put about a 50% discount on OpenAI living up [its]obligations to Oracle,” Luria said. “And I think [that is] a rule of thumb that tells you what the perspective is, which is, it’s possible that OpenAI can spend all this money, but there’s a pretty good chance they won’t spend all this money.”

US stocks rose on Thursday as the world’s leading AI chip manufacturer TSMC (TSM) posted earnings results ahead of expectations that lifted AI market optimism.

The tech-heavy Nasdaq Composite (^IXIC) moved up nearly 0.5%, while the S&P 500 (^GSPC) put on roughly 0.3%. The Dow Jones Industrial Average (^DJI), which includes fewer tech stocks, added 0.25%.

Nvidia (NVDA), Broadcom (AVGO), and other chip stocks rose as TSMC’s (TSM) earnings and executive commentary bolstered confidence in AI-linked semiconductor demand.

Shares of leading AI chipmaker Nvidia rose 1%, while rival Broadcom added 1.4%. Shares of Micron (MU), whose memory chips are used alongside Nvidia’s GPUs in AI servers, climbed 3.4%, while British chip designer Arm (ARM) gained nearly 1%. AMD (AMD) shares were flat.

The moves come as TSMC’s third quarter earnings report surpassed expectations and the Taiwan-based contract chip manufacturer lifted its full-year 2025 revenue growth outlook to the mid-30% range from its earlier 30% forecast.

TSMC also lifted the bottom of its capital expenditure forecast range to $40 billion from $38 billion — with 70% of that budget allocated to ramping up its advanced manufacturing processes related to AI chipmaking — as the company noted “higher growth opportunities in the following years.”

TSMC chair C.C. Wei said: “Our conviction in the AI megatrend is strengthening and we believe the demand for semiconductor[s] will continue to be very fundamental.”

CFO Jen-Chau Huang added that “next year looks to be a healthy year, and we are confident on the mega trend that we’ll continue to invest.”

That conviction is a positive signal for the AI space, as CEOs and Wall Street analysts increasingly express concerns over a market bubble fueled by AI hype and a tangled web of circular investments among the leading industry players.

Please note: Some economic data will not be available due to the government shutdown.

Economic data: Initial jobless claims (week ending Oct. 11); Continuing claims (week ending Oct. 4); Retail sales advance (September); Producer price index final demand (September); Philadelphia Fed business outlook; Business inventories (August); NAHB housing market index (October)

Earnings calendar: Taiwan Semiconductor Manufacturing Company (TSM), Charles Schwab (SCHW), BNY Mellon (BK), U.S. Bancorp (USB), Interactive Brokers (IBKR), Marsh & McLennan (MMC), Infosys (INFY), CSX (CSX)

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Here’s a look at some of the top stocks trending in premarket trading:

Nvidia (NVDA) stock rose 1% in premarket trading on Thursday after an upbeat earnings release from fellow chipmaker TSMC (TSM) helped boost chip stocks.

HPE (HPE) stock fell 8% before the bell after 2026 guidance came in below expectations amid slow growth for the company’s networking business.

J.B. Hunt Transport Services, Inc. (JBHT) stock rose 13% in premarket trading on Thursday following the release of its third-quarter earnings. The transport and logistics company beat Wall Street estimates.

Salesforce (CRM) stock rose 6% before the bell on Thursday after forecasting that it expects revenue of more than $60 billion in 2030, beating Wall Street estimates.

Reuters reports:

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