Tech firms struggle to recover from yesterday’s slump, TSMC rides AI gravy train, ECB holds rates and investors eye Netflix’s water cooler moment

“Tech firms caught up in a geopolitical storm continue to churn out solid results, offering investors some reassurance that the key drivers behind earnings growth remain intact, at least for now,” says Dan Coatsworth, Investment Analyst at AJ Bell.

“AI enablers are making serious money as billions of dollars are invested by companies into securing better processing and data storage capabilities necessary to get the most out of deploying artificial intelligence.”

TSMC

“Taiwan Semiconductor Manufacturing Company (TSMC) beat earnings expectations for the twelfth quarter in a row and upgraded full-year revenue guidance as AI-related demand continues to go through the roof.

“TSMC joins ASML this week in delivering robust figures, yet both companies are seen as vulnerable to a clampdown by the US on the semiconductor industry. Joe Biden seems intent on making it harder for China to access foreign chip technology, while Donald Trump has upset US relations with global semiconductor hub Taiwan.

“Geopolitical tensions have acted as a stark reminder to investors that even the hottest of all investment trends can meet bumps in the road.

“While the news flow from chip-related companies has been solid, the market seems a bit more nervous than usual. Early strength in the tech sector on Thursday quickly faded away, leaving investors wondering if we’re now heading towards a full-blown correction in the sector.”

ECB Policy Decision

“The European Central Bank has shown to the world that beginning the interest rate cut journey does not mean further cuts each time it holds a monetary policy meeting.

“After cutting rates last month for the first time in almost five years, the central bank has now held them firm at 3.75% as it keeps a close eye on inflation. Investors need to consider this scenario with the Federal Reserve and Bank of England when they follow suit and start cutting rates.

“It’s wrong to assume that rate cuts will be a one-way ticket back towards rock-bottom levels. Instead, expect a slow burn which could easily move sideways for months at a time before the next leg down. Even then, the general direction of travel isn’t guaranteed to be a descent.”

Netflix*

“Shares in Netflix have been on a roll this year as investors warm to its strategy of generating multiple sources of revenue, from subscriptions and advertising income to merchandise and content licensing.

“Every quarter, investors look for the water cooler moment that has got everyone talking about Netflix’s platform. Sometimes there isn’t one, but when Netflix scores a hit, it often wins big.

“This time around, it’s got two blockbuster titles which could have boosted subscriber numbers and potentially enabled the streaming platform to charge more for adverts interspersed in the shows. The new season of Bridgerton and the word-of-mouth phenomenon Baby Reindeer both have a ‘buzz’ factor which could play an important role in its results.”

These articles are for information purposes only and are not a personal recommendation or advice.