Martin Gamble on US markets: JPMorgan slips, TSMC’s cautious outlook

US markets retreated this week driven by a sharp sell-off in technology stocks reflecting concerns about debt-funded data centre spending and slowing revenue growth at AI companies.

Consumer prices and producer price inflation came in hotter than expected with headline producer prices rising 6.3% year-on-year for September, representing the largest increase since 2022.

There was a marked rotation out of technology and AI stocks towards ‘old economy’ staples and defensive areas of the market.

The Philadelphia Semiconductor index, known as the SOX, fell for seven straight trading sessions, wiping out around a trillion dollars of market value as sentiment towards AI soured amid rising funding costs and credit worries.

Broadcom CEO Hock Tan stoked the fire after warning about potential funding constraints and compared some investors pursuing the AI boom to gamblers, according to Bloomberg reports.

Software stocks were beneficiaries of the sell-off in AI stocks as investors reassessed disruption fears, with Cognizant Technology Solutions up 11% and public sector software provider Tyler Technologies up 10.5%.

Marketplace platform eBay was one of the biggest risers, gaining nearly 10% to reach a new all-time high of $122, after Morgan Stanley named the company as its top pick in the internet sector, with renewed takeover speculation adding fuel to the shares.

JPMorgan – delivers rare earnings miss

High expectations proved too difficult to meet for banking juggernaut JPMorgan which revealed a rare earnings miss, as weaker than expected fixed income trading, and slowing investment banking activity offset strong equity trading revenues.

Rising bond yields prompted the bank to raise deposit rates to prevent customers shopping around for better returns, which squeezed deposit margins in the quarter.

The bank said consumer spending was holding up despite inflationary pressures on household budgets. Credit card balances increased year-on-year which could leave households exposed to higher borrowing costs or a weaker jobs market.

JPMorgan raised provisions for corporate loans, highlighting growing caution on credit quality in a rising interest rate environment.

Looking ahead, the bank raised its net interest income guidance for 2027 and nudged up its full year 2026 projection. The shares are up 4% so far in 2026, underperforming the 12% gain in the S&P 500 index.

TSMC – record profits

The world’s largest contract chipmaker Taiwan Semiconductor Manufacturing Company (TSMC), whose customers include Nvidia and Apple, posted a sixth consecutive quarterly record profit.

While the company said it saw no slowdown in AI demand, it did warn that consumer and price-sensitive markets faced pressure from higher component prices and macroeconomic uncertainties.

TSMC maintained its 2026 projection to invest between $60-$64 billion in capital expenditures and plans to significantly ramp-up spending over the next two years, with commitment to US manufacturing totalling $265 billion.

This includes potential expansion in Texas with ongoing discussions around Elon Musk's proposed Terafab project. CEO C.C. Wei stressed that any facility operated by TSMC would need to remain under TSMC's operational control.

The shares fell after getting caught up in the wider semiconductor sell-off related to AI funding concerns and higher borrowing costs. Over the past year, TSMC shares are up around 36% compared with 16% for the Nasdaq Composite index.

Johnson & Johnson shares fall

Healthcare giant Johnson & Johnson (J&J) saw its shares fall around 6% on 13 October, despite third quarter earnings topping analysts' expectations as sluggish growth in medical devices weighed on investor sentiment.

Medtech sales grew just 2.5% to $8.6 billion, below analysts' forecasts, marking a second consecutive quarterly miss, while J&J’s largest division, surgery, saw a revenue decline.

Weakness outside the US reflected geopolitical disruption in the Middle East, austerity in Europe and pricing pressure in China. Management acknowledged performance fell short of expectations and vowed to improve performance in the fourth quarter.

J&J raised its full year outlook, projecting revenues to top $100 billion for the first time at the middle point of the range and nudged up adjusted earnings per share guidance to $11.1.

The shares are up around 22% year-to-date, and up nearly 30% over the past year, comfortably outperforming the S&P 500 index.