🏦 These banks are... in the money

What’s going on here?

Bank of America and Morgan Stanley both announced better-than-expected earnings updates on Thursday, showing that the US is still leading the pack.

What does this mean?

Bank of America vaulted over analyst expectations, boosted by strong performances on both Main Street and Wall Street. On Main Street, the bank’s “net interest income” – the difference between what it earns on loans and what it pays savers – was loftier than expected. And on Wall Street, a pickup in trading activity and dealmaking generated more fees than forecast. Morgan Stanley’s stellar quarter, meanwhile, was helped by its star player: investment management. And with an unexpected lift in net interest income and a surprising drop in expenses, it also banked a profit that blew past predictions.

Why should I care?

For markets: The future’s looking golden.

Big US banks tend to keep their cards close to the chest when it comes to annual earnings guidance. There are just so many things – market conditions, companies’ willingness to make deals, interest rates – that are out of their control. But Bank of America broke cover on Thursday with some positive predictions: it expects to earn $14.5 billion in net interest in the first quarter of this year and at least $15.5 billion in the last. That’s thanks to stronger demand for loans, still-high interest rates, and shrewd loan pricing.

The bigger picture: Reaping the harvest.

It’s not every day that you see banks crushing it across the board. The consumer side of things (savings and loans) and the riskier investment banking side (trading and dealmaking) both have their ups and downs. For Morgan Stanley, though, winning is par for the course. That’s because it makes most of its money from fund management: a stable, predictable business that doesn’t often experience the economic rough and tumble.

What’s going on here?

TSMC unveiled fresh results and forecasts that brought investors – in unison – to their feet on Thursday, with so much of the world dancing to AI’s tune.

What does this mean?

The Taiwan-based semiconductor maker saw a 39% boom in revenue and a 57% pickup in profit in the fourth quarter – both better than analysts had predicted. On top of that, the company said it’ll rake in at least $25 billion in first-quarter revenue alone – 6% ahead of expert forecasts. It did warn that it’ll have to spend more money to make more money (and more semiconductors) though. TSMC plans to shell out between $38 billion and $42 billion on tech and added capacity to meet growing chip demand. That’s almost 20% more than analysts had penciled in. But it’s not likely to rattle investors: TSMC is the world’s biggest supplier of semiconductors, and a key supplier to tech superstars like Apple and Nvidia, so it’s seen demand climb in lockstep with the AI boom. And based on the company’s latest outlook, that doesn’t seem about to change.

Why should I care?

For markets: It’s not a bubble if it doesn’t pop.

Sure, the AI market has its challenges: there’s talk of a bubble, as well as plenty of geopolitical drama. But TSMC has been powering ahead. That’s partly thanks to its chip-hungry Magnificent Seven clients and the likelihood it’ll keep more than half its Chinese orders (worth over 6% of its revenue), despite new US export restrictions. The company’s optimistic forecasts and strategic expansion plans bode well for the industry at large, too, including its own suppliers. Just look at Tokyo Electron: its shares rose 4% after the report – only slightly less than TSMC’s 5% jump.