Key Points

• U.S. stocks steady as chips and banks rebound: Wall Street stabilized as strong earnings from major banks and upbeat semiconductor results helped offset ongoing geopolitical and policy uncertainty, keeping major indexes near record levels.
• TSMC deepens U.S. expansion on AI demand: Taiwan Semiconductor signaled a further acceleration in U.S. investment, reinforcing confidence in long-term AI-driven chip demand and supporting the broader semiconductor supply chain.
• India pivots trade toward China as U.S. tariffs bite: Indian exports to China surged while shipments to the U.S. declined, highlighting New Delhi’s push to diversify trade partners amid elevated U.S. tariffs and shifting global trade dynamics.
• Asian chip stocks rally on U.S.-Taiwan deal: Semiconductor shares across Asia advanced after a U.S.-Taiwan trade agreement and strong chip earnings, with Taiwan outperforming regional peers as investors priced in sustained capital spending and supply-chain realignment.

January Economic Calendar

U.S. Stocks Rebound as Chips and Banks Lead

U.S. equity markets advanced Thursday as strength in semiconductors and financials lifted major indexes, even as futures steadied later in the session. The S&P 500 and Nasdaq rose about 0.3%, while the Dow climbed 0.6% and small caps outperformed.

Chipmakers rallied after Taiwan Semiconductor Manufacturing Company delivered strong quarterly results, reinforcing optimism around AI-driven demand and boosting names such as Nvidia and Advanced Micro Devices. Financials also gained following solid earnings from Goldman Sachs and Morgan Stanley.

While fundamentals remain supportive, investors remain cautious amid elevated valuations, geopolitical risks, and policy uncertainty, leaving major indexes modestly lower for the week overall.

TSMC Signals Deeper U.S. Expansion on AI Demand

Taiwan Semiconductor Manufacturing Co. is preparing to scale up its already massive U.S. footprint, signaling that its $165 billion investment commitment is likely to rise as demand for artificial intelligence chips accelerates.

TSMC said it is stepping up capital expenditure in both Taiwan and the U.S., with plans to build a multi-plant “gigafab cluster” in Arizona after purchasing additional land. The expansion follows strong earnings and coincides with a new U.S.-Taiwan trade agreement that lowers tariff risks and supports reshoring of chip production.

Executives emphasized that the investment reflects customer demand rather than trade negotiations, noting that TSMC’s first Arizona fab is already producing chips at yields comparable to its leading Taiwan facilities, reinforcing confidence in U.S. manufacturing execution.

India Shifts Trade Toward China as U.S. Tariffs Bite

India’s export flows are rebalancing as steep U.S. tariffs push New Delhi to deepen trade ties with China, even as shipments to the United States weaken. Exports to China surged 67% in December, while shipments to the U.S. fell 1.8%, reflecting the impact of 50% U.S. tariffs on Indian goods.

China has now emerged as India’s largest merchandise trading partner, overtaking the U.S. in the April-December period, though at the cost of a widening bilateral trade deficit. Overall, India’s December trade deficit rose 21.4% year on year to $25 billion as imports outpaced exports.

The data underscore India’s accelerating export diversification strategy amid tariff pressures and a fragile outlook for a U.S.-India trade deal.

Asian Chip Stocks Lead as U.S.-Taiwan Trade Deal Lifts Semiconductor Outlook

Asian equity markets traded mixed on Friday, but semiconductor stocks outperformed after strong earnings and a U.S.-Taiwan trade agreement reinforced confidence in global chip demand. Shares of Taiwan Semiconductor Manufacturing Co. rose about 1.5% after the company reported another record quarter and signaled a sharp increase in 2026 capital spending to meet AI-driven demand, helping Taiwan’s benchmark index outperform the region.

The U.S.-Taiwan deal, which includes large-scale Taiwanese investment commitments in U.S. chip manufacturing in exchange for lower tariffs, supported sentiment across Asia, lifting major chipmakers in South Korea and Hong Kong. The rally was reinforced by gains on Wall Street, where bank and technology stocks advanced on solid earnings and resilient U.S. labor market data.

Conclusion

Markets are navigating a complex mix of solid earnings momentum and elevated geopolitical and policy risk. Strong results from banks and semiconductor leaders underscore the resilience of corporate fundamentals, particularly in areas tied to artificial intelligence and global infrastructure investment.

At the same time, shifting trade patterns — from India’s export realignment to the deepening U.S.-Taiwan technology partnership — highlight how geopolitics continues to reshape supply chains and capital flows. While volatility risks remain, especially around tariffs and global diplomacy, the current environment favors selective exposure to earnings-driven sectors with clear structural tailwinds.

Investment Insights

• Earnings remain the primary driver: Strong results from banks and semiconductor leaders reinforce that equity performance in early 2026 is being led by earnings quality rather than multiple expansion.
• AI and semiconductors retain structural tailwinds: TSMC’s expanded U.S. investment and robust capex outlook highlight sustained demand visibility across the AI and advanced chip ecosystem.
• Geopolitics is reshaping trade, not halting it: India’s pivot toward China and the U.S.-Taiwan deal illustrate redistribution of trade flows rather than a collapse in global commerce.
• Volatility favors selectivity: Policy uncertainty argues for disciplined positioning in high-quality, cash-generative companies with pricing power and global diversification.