Taiwan Semiconductor Manufacturing (TSM) announced record-breaking June sales of $13.99 billion, representing a massive 67.9% year-over-year increase. According to reports from Investing.com India, this strong performance for the semiconductor giant is creating positive momentum for AI-related stocks, which are now positioned to continue posting sales and earnings that exceed analyst estimates. The company's second quarter sales rose 36% and earnings surged 77.4%, with TSM also raising its sales guidance above analyst estimates. As per Investing.com India, despite continued profit-taking and mean reversion algorithms hindering many AI and data center-related companies, TSMC's better-than-expected results and strong guidance bode well for other AI-related stocks. The company is scheduled to announce its second quarter results on Thursday, with analysts expecting 35% annual sales growth and 48% earnings growth, though market expectations suggest the company may deliver even better-than-expected results due to its accelerating sales trajectory.
SK Hynix shares jumped nearly 13% in Seoul on Wednesday, tracking gains in U.S. tech stocks after softer-than-expected U.S. inflation data, as reported by Reuters. The rally lifted other South Korean semiconductor stocks, with Samsung Electronics rising nearly 8% and chip equipment maker Hanmi Semiconductor gaining about 25% in early trade. The gains came after weeks of volatility in chip stocks, as investors grappled with concerns over potential slowdown in memory earnings growth. However, analysts remain optimistic about structural AI demand, with Kim Sunwoo from Meritz Securities noting that suppliers currently meet only 75-80% of DRAM demand and expecting this to fall to 60% range in 2027. As per Reuters, Kim added that suppliers would still be able to meet only around 70% of demand even after excluding more speculative orders.
The Producer Price Index (PPI) declined 0.3% in June, exceeding economists' consensus estimate of a 0.2% decline, according to Investing.com India reports. The core PPI, excluding food, energy, and trade services, rose 0.1% in June, while wholesale food prices declined 0.4% and energy prices fell 6.4%. This moderation in wholesale inflation is providing additional support for market sentiment. The June Consumer Price Index (CPI) came in better than economists expected with a 0.4% decline, marking the first time the CPI has declined since 2020. Owners' equivalent rent, representing shelter costs, rose only 0.2% in June, which was substantially lower than previous months. Meanwhile, the Commerce Department announced on Thursday that retail sales rose 0.2% in June, which was in line with economist expectations, with online retail sales surging 1.9% in June, likely boosted by Amazon's Prime Day. Core retail sales, excluding vehicle and gas station sales, rose a healthy 0.5% in June, with seven of the 13 categories improving in the June retail sales report.
HSBC noted that improving profitability of AI services should continue to underpin strong cloud spending, while the industry's shift toward three- to five-year long-term supply agreements should improve earnings visibility over the next two to three years and reduce earnings volatility. Barclays added to the positive sentiment, initiating research coverage on SK Hynix's newly listed American Depositary Receipts (ADRs) with an "overweight" rating and $330 price target, with the ADRs surging nearly 28% to $193.92 on Nasdaq. Goldman Sachs noted that the selloff in South Korean chip stocks had been amplified by the unwinding of positions in newly launched exchange-traded funds that are heavily skewed to one or two stocks, while the underlying semiconductor cycle remained fundamentally robust. SK Hynix Chief Executive Kwak Noh-jung expects the global memory industry to face its worst-ever supply shortage in 2027, with demand continuing to exceed production capacity well beyond 2030 despite aggressive expansion plans.
