Wall Street staged a decisive rebound Thursday, shaking off back-to-back losses as Taiwan Semiconductor Manufacturing Company delivered another quarter that exceeded even the most optimistic expectations, sending a clear message to doubters: the AI infrastructure buildout is far from over.

The Dow Jones Industrial Average surged 401 points, or 0.8 percent, while the S&P 500 climbed 0.6 percent and the tech-heavy Nasdaq Composite advanced 0.9 percent. But the real story was in semiconductors, where gains were measured in the high single digits across the board.

TSMC's Numbers Speak for Themselves

The world's largest contract chipmaker reported fourth-quarter profit of NT$505.74 billion ($15.5 billion), a 35 percent jump from a year ago that smashed analyst estimates. Revenue hit NT$1.046 trillion, driven by insatiable demand for the advanced chips that power artificial intelligence applications.

But it was the company's forward guidance that truly electrified markets. TSMC raised its first-quarter revenue outlook to between $34.6 billion and $35.8 billion with gross margins expanding to 63-65 percent—well above the 62.3 percent margin delivered in the fourth quarter.

"Taiwan Semi's results today, and more importantly, their capex spending plans point to reassuring investors that the AI trade is not necessarily a bubble at this point."

— Kim Forrest, Chief Investment Officer, Bokeh Capital Partners

$56 Billion Capital Spending Blueprint

Perhaps most significant for the broader semiconductor ecosystem was TSMC's capital expenditure guidance. The company announced plans to invest between $52 billion and $56 billion in 2026—far exceeding the $46 billion average in analyst estimates and signaling extraordinary confidence in sustained AI demand.

That guidance sent chip equipment makers into orbit. Applied Materials, Lam Research, and KLA each surged more than 7 percent as investors priced in the orders that will flow from TSMC's aggressive expansion. Dutch equipment giant ASML jumped 7 percent in European trading to a record high, pushing its market capitalization above $500 billion.

Thursday's Semiconductor Scoreboard

  • TSMC (TSM): +5.4%
  • Nvidia (NVDA): +2.0%
  • ASML: +7.0% (record high)
  • Applied Materials: +7.2%
  • Lam Research: +7.4%
  • KLA Corporation: +7.1%
  • Micron Technology: +2.1%
  • VanEck Semiconductor ETF (SMH): +3.0%

AI Demand Shows No Signs of Slowing

TSMC's results arrive at a crucial moment for the AI narrative. After two years of seemingly unstoppable gains, semiconductor stocks had wobbled in recent sessions amid concerns about valuation and the sustainability of AI-driven demand. Thursday's report emphatically answered those questions.

Counterpoint Research analysts declared that 2026 will be another "breakout year" for AI server demand, with TSMC positioned to capture the lion's share of manufacturing for the most advanced chips. The company's 3-nanometer and 5-nanometer processes, which produce the chips inside Nvidia's data center GPUs and Apple's latest processors, are running at full capacity with customers lining up for allocation.

Nvidia, whose GPUs have become synonymous with AI computing, rose 2 percent after TSMC's results validated the demand environment. The company's shares had retreated in recent sessions amid uncertainty about China export policy, but Thursday's action suggested investors are refocusing on fundamental demand rather than geopolitical noise.

Bank Earnings Add to Positive Tone

The chip rally wasn't the only bright spot. Financial stocks contributed to the rebound as Morgan Stanley and Goldman Sachs both delivered quarterly results that exceeded expectations, capping a strong earnings season for Wall Street's biggest banks.

Goldman Sachs shares rose following a beat on earnings, though revenue fell slightly short of estimates. Morgan Stanley advanced 1.2 percent after reporting strength across its wealth management and investment banking divisions. BlackRock, the world's largest asset manager, climbed nearly 2 percent after reporting record assets under management of $14 trillion.

Looking Ahead

For investors who have ridden the AI trade since ChatGPT burst onto the scene in late 2022, Thursday's session provided powerful validation. TSMC's willingness to invest $56 billion in a single year—more than the GDP of many countries—reflects a bet that AI infrastructure demand will remain robust for years to come.

The message from the world's most important chipmaker couldn't be clearer: the AI revolution is still in its early innings, and the companies building the picks and shovels for this gold rush see no reason to slow down.

Market attention now turns to next week's earnings from Intel and other semiconductor names, which will provide additional data points on whether the industry's optimism is warranted across the board or concentrated in AI-specific plays.