👋 Investors ditched the S&P 500

What’s going on here?

The world’s biggest contract chipmaker announced on Monday that it made 39% more revenue this January and February than last, giving investors a reassuring glimpse into the tech industry’s recent spending habits.

What does this mean?

TSMC boasts a Rolodex of big-name clients, including Nvidia, AMD, Qualcomm, and Alphabet. So it makes sense that investors use the company’s sales to assess spending across the sector. And if you perked up your ears on Monday, you may have heard them breathe a sigh of relief. Remember, escalating tariffs have threatened to fracture trade relationships, at a time when the emergence of cheap-and-cheerful AI models from China have exacerbated concerns that US firms might’ve overspent. That could’ve persuaded tech companies to pull back – but for now, TSMC’s results suggest they’re standing by their billion-dollar budgets.

Why should I care?

Zooming in: The Land of Opportunity… or so they say.

The US struck a deal with TSMC, agreeing to keep it free of industry-wide 25% tariffs if the firm brought more manufacturing onto stateside soil. Not one to do things by halves, TSMC duly launched the biggest foreign-led manufacturing expansion in the US, putting $100 billion behind brand-new plants. Problem is, it’ll cost more to churn out chips in the States than in Asia – especially if the US president follows through with his call to scrap the Chips Act, which financially supports the semiconductor industry. So TSMC’s margins may feel the crunch.

The bigger picture: Get in, loser, we’re going chip shopping.

A whole host of industries have been lining up for AI chips, from robotics to healthcare and autos. Chinese EV maker Xpeng is the latest to reveal a big bet: plans to mass-produce flying cars and humanoid robots by next year. Investors approved of the sci-fi vision, sending the firm’s stock up 7% on Monday to its highest level since 2022.

What’s going on here?

The US president admitted that America’s in a “period of transition” – and investors, worried that the outcome will be more caterpillar than butterfly, retreated from a range of global stocks.

What does this mean?
The president believes that policies like spending cuts and higher tariffs will bolster the US economy in the future – even if they spark a recession along the way. But investors don’t seem willing to be patient: they’ve wiped the S&P 500 of its post-election gains and pushed the Nasdaq 100 into “correction territory”, meaning it’s fallen 10% in the last month. They’ve been pushing into safe-haven assets like Treasury bonds instead of riskier stocks, looking to cushion their portfolios against any economic nasties.

Why should I care?

For markets: New president, new playbook.

“Buy the dip” might sound like the rallying cry of Reddit’s “Wall Street Bets” forum, but the strategy has generally worked for investors since the global financial crisis. That’s mainly because the Federal Reserve has been willing to step in at the first sign of distress, buoying up markets with rate cuts and cash injections when they’ve started to wane. But with this president more willing to let short-term blips resolve themselves, market dips might not be filled in so quickly.

The bigger picture: Investors have been picking up pennies in front of a steamroller.

Investors have been drawn to “positive carry” strategies in recent years: trades that produce small but predictable profits and look good on paper. Problem is, it just takes one negative event to wipe out years of profit – and right now, disruption looks increasingly likely. Tactics like selling options, using leverage to exploit tiny mispricings, “shorting” volatility, and betting on high-yield currencies may have seemed like safe bets for a while, but they look a lot riskier now.