Chip Earnings Power Averages Higher as Nasdaq Volatility Cools Midweek

The S&P 500 rose 1.51% and the Nasdaq Composite gained 1.98% over the three-session week, while volatility eased; the 10-year Treasury yield increased 4 basis points to 5.03%. Company updates included Texas Instruments’ 28% year-over-year revenue growth, Meta’s 26% revenue growth alongside a $9.89 billion litigation-related charge, and IBM’s 5% revenue growth. Separately, a $63 billion financing structure will support AI compute capacity for Anthropic using Broadcom technology, and Lockheed Martin received a $694 million U.S. Air Force hypersonic-missile production contract.

Analysis

The cleaner earnings signal is cyclical operating leverage at Texas Instruments, but one quarter does not establish a durable recovery: watch Q4 delivery against the midpoint of guidance and whether industrial/auto demand broadens. IBM’s cash generation supports a quality/defensive screen, though growth remains modest and does not alone warrant paying up.

The AI complex has a less obvious financing risk. The Broadcom-related $63B structure validates demand for custom compute, but deliveries begin in 2027 and residual-value support leaves Broadcom exposed if Anthropic’s utilization or financing economics disappoint. Do not treat the headline facility as near-term recognized revenue. For Meta, the legal charge obscures operating performance, while $135–145B of capex raises the bar for measurable ad and AI returns; power, depreciation, and legal cash outflows can pressure future free cash flow. Verify payment timing and capex-to-revenue productivity.

Near term, easing tech volatility is supportive, but a 5.03% 10-year yield and WTI above $100 are counterweights: higher discount rates and energy-driven inflation could compress long-duration tech multiples even as earnings remain strong. Index support/resistance levels are too close to justify a directional market trade. Over 6–18 months, Lockheed Martin’s capacity expansion may enable deliveries, but the cited award alone does not establish material earnings upside; execution, testing, and follow-on procurement matter. Contrarian risk: enthusiasm may capitalize AI capacity years before utilization and returns are proven.

Key Decisions for Investors

• Treat Broadcom (AVGO) as a watch, not a buy on the financing headline alone. Reassess when customer purchase commitments, Broadcom’s residual-support exposure, and delivery economics are disclosed; deterioration in Anthropic funding or utilization would falsify the demand thesis.
• Keep Texas Instruments (TXN) on a cyclical-recovery watchlist; consider exposure only if Q4 revenue tracks at least the guidance midpoint and subsequent commentary confirms broad industrial/auto demand. A miss or renewed inventory weakness invalidates the setup.
• For Meta (META), monitor capex guidance, ad growth, and cash payments related to the legal agreement together. Avoid reading charge-adjusted EPS as cash earnings; a capex increase without corresponding revenue productivity is a downside catalyst.
• Do not chase the broad tech rally solely on falling VXN. Reconsider risk if the 10-year yield remains above 5% or energy prices sustain their surge; these conditions can overwhelm near-term earnings optimism through valuation compression.