S&P500 and Nasdaq 100: Pre-Market Rally Fueled by TSMC Earnings and AI Demand

TSMC’s AI Boom Ignites Pre-Market Tech Rally, But Broader Market Risks Loom

U.S. stock futures rose Thursday morning after Taiwan Semiconductor Manufacturing Co. (TSMC) posted record third-quarter earnings and lifted its revenue outlook on strong AI chip demand. The report sparked pre-market gains in major tech names and reinforced investor confidence in AI-related growth.

S&P 500 and Nasdaq 100 futures were up 0.4% and 0.6% respectively, positioning the market for a higher open despite rising volatility and geopolitical tension.

How Did TSMC’s Earnings Surprise Feed Into U.S. Tech Optimism?

TSMC, the world’s top contract chipmaker, reported a 39.1% year-over-year jump in profit to NT$452.3 billion ($14.6 billion), beating estimates and setting a new high. Revenue rose 30.3% to NT$989.92 billion, with the company citing continued strength in AI chip demand from clients including Nvidia and Apple. TSMC raised its 2025 growth forecast to the mid-30% range and increased its capital spending target to $40 billion, reinforcing bullish expectations across the semiconductor sector.

The pre-market reaction was swift. Nvidia rose 1.2%, Broadcom added 1.7%, and Micron climbed 3.6% following a bullish UBS upgrade.

Salesforce also jumped 6% after announcing long-term revenue goals above $60 billion by 2030, helping support a broader tech bid ahead of the U.S. open.

Where Are the Core Drivers Within TSMC’s Report?

The company’s high-performance computing segment, which includes AI and 5G applications, contributed 57% of total revenue. Advanced chips sized 7nm or smaller accounted for 74% of wafer revenue, with strong demand for its 3nm and 4/5nm products.

Analysts at Counterpoint Research highlighted high utilization rates and consistent orders from AI and smartphone platform customers as central to the quarter’s strength.

These fundamentals are reinforcing the AI trade’s dominance, even as broader participation in the rally appears to be thinning.

Is the Rally Sustainable With Broader Market Risks Rising?

LPL Financial’s Adam Turnquist flagged narrowing breadth in the S&P 500, with fewer stocks driving the upside and concentration risk increasing. That’s a red flag for traders leaning heavily into large-cap tech.

Meanwhile, volatility has ticked higher, with the VIX hovering near 20, and U.S.-China trade tensions are again in focus following tariff threats on goods and strategic materials.

TSMC also acknowledged tariff uncertainty in consumer-sensitive markets, though its U.S. investments may cushion the impact.

Short-Term View: Bullish AI Sentiment, Fragile Breadth

The immediate outlook remains bullish for AI-linked tech stocks, especially semiconductors, following TSMC’s results and guidance. But with the rally still dependent on a narrow group of leaders and policy uncertainty rising, traders should remain cautious. Watch for confirmation of strength at the open and monitor sector rotation closely to assess whether bullish sentiment expands beyond AI.

More Information in our Economic Calendar.