Stock Market Today: Dow, S&P 500, Nasdaq Rise as TSMC Earnings Boost AI Optimism

On Thursday, US equities advanced after TSMC's (Taiwan Semiconductor Manufacturing Company) impressive quarter and raised guidance which increased the optimism regarding the AI demand, thereby overpowering the worries about the prolonged US-China trade dispute.

The Nasdaq Composite (^IXIC) was up 0.6%, driven by technology and AI stocks such as Nvidia (NVDA), while the S&P 500 (^GSPC) made an approximate gain of 0.4%. The Dow Jones Industrial Average (^DJI), which contains fewer tech companies, showed a gain of 0.2%, indicating the widespread confidence among investors.

TSMC Surpasses Expectations

TSMC, a key chip supplier for Nvidia and Apple (AAPL), reported nearly a 40% jump in quarterly profit, beating estimates and reaching record highs. The company raised its full-year 2025 revenue growth forecast for the second time this year, now expecting mid-30% growth, up from its earlier 30% projection.

The chipmaker also increased the lower end of its capital expenditure forecast to $40 billion, with 70% dedicated to AI chip production, signaling strong future demand. TSMC Chair C.C. Wei emphasized, “Our conviction in the AI megatrend is strengthening, and demand for semiconductors will remain fundamental.” CFO Jen-Chau Huang added that the company is confident in continued investment for AI-driven growth next year.

Impact on AI and Chip Stocks

Following TSMC’s update:

Nvidia (NVDA) shares rose 1.6%

Broadcom (AVGO) climbed 1.4%

Micron (MU) jumped 3.4%

Arm (ARM) gained nearly 1%

AMD (AMD) remained largely flat

These gains reflect renewed confidence in AI chip demand and the broader semiconductor sector.

Other Market Drivers

Strong quarterly results from Wall Street banks also supported positive sentiment.

Investors are anticipating potential Federal Reserve interest rate cuts later this year.

However, headwinds remain:

US-China trade tensions continue to unsettle markets. President Trump confirmed the strains, stating, “Well, you’re in one now,” while Treasury Secretary Scott Bessent hinted a trade truce could be extended.

US government shutdown has entered its third week, limiting economic data flow and raising uncertainty about a resolution, potentially stretching into November.

AI Market Optimism vs. Bubble Fears

Wall Street analysts warn that the AI hype could be inflating valuations, especially as tech stocks are heavily linked to OpenAI’s future revenue promises. Despite this, some experts believe the market may not fully price in OpenAI’s potential success, meaning a slowdown in AI implementation might not trigger a sharp sell-off.

For instance, Oracle (ORCL) surged 43% after reporting massive AI-related contracts, though the stock later corrected when reports revealed most deals were OpenAI-related. Analysts see this as an indication of market caution amid AI optimism.

Fed Commentary

The Federal Reserve Governor Chris Waller, who is in the running to replace Jerome Powell in 2026, proposed a 25-bps rate cut this month but then pointed out the need for caution because of the contradictory economic data: having a vigorous economy as opposed to a deteriorating one in terms of jobs.

Bottom Line:

TSMC’s stellar earnings and upgraded AI-driven guidance have lifted US stock markets, with tech and chip stocks leading gains. Investors are optimistic about AI demand, although trade tensions, government shutdown risks, and valuation concerns remain key factors to watch.