We’ve just waved goodbye to the first half of 2026, and now investors are girding their loins for the second quarter earnings season.
This begins next week when a large chunk of the giant US financial institutions report.
This includes the world’s largest bank by market capitalisation, JP Morgan Chase, its biggest rival, Bank of America, and other significant players such as Citigroup, Wells Fargo, and Morgan Stanley.
Next week also brings results from old favourites such as Netflix, along with a couple of highly significant, AI-adjacent corporations, ASML and TSMC.
Dutch giant ASML provides the lithography machines, which are foundational to chip manufacturing, while TSMC (the Taiwan Semiconductor Manufacturing Company) does pretty much what it says on the tin.
At the end of June, ASML hit an all-time high just a fraction short of $2,000 per share.
That represented a gain of 172% from a year ago, although in common with many companies connected to the development of AI, it has suffered from a heavy bout of profit taking so far this month.
TSMC was up 110% over the same period, and, like ASML, has pulled back from these highs since the beginning of July.
So, it is fair to say that these two companies have put in an impressive performance by anyone’s standard.
Unless, of course, your standard is that of semiconductor stocks.
Within this area, there have been some truly awesome market performers.
Without running through the whole gamut, one can pull out, say, Micron Technology as the poster child for chip stock outperformance. Micron topped out around a week before ASML and TSMC.
But going into that high, it registered a gain of 900% from this time last year, tacking on 290% over the last three months alone.
The iShares Semiconductor ETF (SOXX), which contains ten chip giants including Micron, AMD, NVIDIA, Intel, and Marvell Technologies, has gained 160% over the past twelve months, although it has also lost some of its shine over the past two weeks.
Compare this to the tech-heavy NASDAQ 100 (up a mere 35% from July last year into its all-time high in early June) or the S&P 500 (up a ‘miserable’ 22% over the same period), and it’s plain to see that judicious stock picking can have its place.
While these outsized gains have a whiff of irrational exuberance about them, all these chip stocks can point to a succession of strong earnings beats, along with overstuffed order books and stunning profit margins.
It’s just like the old days when NVIDIA went from a niche gaming play to the most valuable corporation in the world by market cap, a position it still holds.
So, what to expect from their second quarter results? More of the same, or could this be the quarter that clangs the warning bell?
That’s a question that gets asked ahead of every results season, and it looks as if the answer will be much the same.
Most of these AI-related corporations look set to beat expectations for both earnings and revenues, and, if so, then they have all pulled back enough from recent all-time highs for this news to give them a shot of upside momentum.
But, critically, what will the forward guidance sound like?
Could there be just the smallest hint that the near-exponential growth in sales that has been a feature of semiconductors is starting to fade?
In early June, Broadcom dropped 12% in a day, despite beating consensus expectations on earnings and revenues, after the company maintained its full-year chip revenue target rather than raising it.
Then, a few weeks later, Micron Technology popped and then dropped sharply, as investors began to raise doubts over the future of the AI-driven memory chip boom.
Could these be the first inklings that there’s trouble ahead? Will there be more questions asked about the money being raised to develop AI?
Are there signs that the return on investment won’t match expectations? With markets priced for perfection, removing the wrong Jenga brick could have devastating consequences.
(This is a fortnightly column by David Morrison. He is a Senior Market Analyst at Trade Nation. Views are his own.)
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