This AI Rally Can Withstand Trump’s China Trade War. Why Markets Can Thrive.
Oct 16, 2025 06:53:00 -0400 | #Markets #The Barron's Daily
(SAM YEH/AFP via Getty Images)
It’s symbolic that bullish news for artificial intelligence stocks comes amid a vacuum of official data because of the government shutdown. That’s giving more reason for investors to just shrug off economic risks and bet on AI.
A trade war is harder to ignore.
TSMC , the Taiwanese semiconductor manufacturer, posted blowout quarterly results, with profit soaring and an increased revenue forecast amid demand from AI. It comes hot on the heels of an upbeat outlook from chipmaking equipment group ASML on Wednesday.
Together these two stocks are the picks and shovels of the AI rally. Concrete good news from them is harder to cast off as market exuberance.
With few clues about the Federal Reserve’s path forward on interest rates due to the data blackout, the AI rally has taken the spotlight. But a trade war is more glaring than an opaque economic backdrop.
“We’re in one now,” President Donald Trump said late Wednesday of a U.S.-China trade war, darkening the picture for relations between Washington and Beijing that have already rocked the market this week.
China’s curb on rare-earth exports will affect the chip makers underpinning AI. It should be noted that TSMC, too, is already a pawn in Trump’s trade game with the chip maker investing heavily in U.S. factories as the White House looks to boost U.S. semiconductor production and reduce reliance on imports.
Along with valuations that keep stretching, the case for AI caution is growing stronger. Yet investors betting against tech have been burned repeatedly.
And while most economic data are absent, there are other pleasing fundamental signals. Bank earnings show Wall Street is chugging along and the latest whispers out of the Fed suggest interest rates will keep going down. Intel earnings next week may be another catalyst for tech bets.
It will take more than Trump’s latest comments to blunt AI optimism.
— Jack Denton
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Taiwan Semi Raises Guidance, Soothing Fears of an AI Bubble
What artificial intelligence bubble? Taiwan Semiconductor, the dominant manufacturer of the chips being used to power the technology, just raised its revenue guidance on the back of AI strength.
- TSMC now expects revenue growth this year in the mid range of between 30% and 40%. The company previously guided for annual revenue growth of 30% in U.S. dollar terms. The Taiwanese company, crucial to the AI boom, also posted earnings that easily beat Wall Street expectations.
- TSMC reported record third-quarter net profit of 452.30 billion New Taiwan dollars, or $14.77 billion, up 39% from the same period a year earlier. That was ahead of analysts’ expectations of NT$410.58 billion.
- While some analysts have raised concerns about circular financing deals such as that struck between ChatGPT-developer OpenAI and Nvidia creating the risk of a bubble in AI investment, TSMC shrugged off such worries and said demand was growing exponentially.
What’s Next: TSMC Chief Executive C.C. Wei told analysts Thursday that the AI megatrend is strengthening and he believes demand for semiconductors will continue to be fundamental for AI applications.
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Federal Judge Blocks Trump Administration’s Shutdown Layoffs
A federal judge has dealt the Trump administration at least a temporary blow, blocking the government from issuing or implementing shutdown-induced layoffs of federal workers. That includes the reductions in force announced by budget director Russell Vought last week.
- Some 4,000 federal employees have received reduction in force notices, and Vought said during a podcast interview on Wednesday that ultimately that number could exceed 10,000. But federal Judge Susan Illston of Northern California District Court granted the unions a temporary restraining order.
- The ruling is only applicable to agencies with affected staff who are represented by the unions that filed the lawsuit, and it pauses the 60-day clock on the prior RIF notices. The unions argued the government acted in an “arbitrary and capricious manner.”
- The government argued during the hearing that the court doesn’t have jurisdiction and that the plaintiffs failed to show irreparable harm since the layoffs do not go into effect for 60 days and some might not happen at all. But the judge said the merits were troublesome.
- Danielle Leonard, the lawyer representing the labor unions in the case, cited “the emotional distress of being told that you’re being fired” as an example of harm caused. “It is traumatic. It is distressing.” The order is in effect for at least two weeks.
What’s Next: President Donald Trump is battling in the courts on multiple fronts. The administration’s arguments in favor of the sweeping country-specific tariffs it imposed under emergency powers are set for Nov. 5. Trump said Wednesday he might attend.
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Wall Street’s Business Is Booming. Consumers Are Holding Up, Too
Wall Street’s biggest banks reported robust third-quarter earnings that demonstrate strong dealmaking and corporate spending, plus healthy consumer spending. Despite economic warning signs like a weakening labor market, the engine is humming for the banking business, and the economy is holding up despite worries about cracks appearing.
- Morgan Stanley and Bank of America both blew past expectations, echoing Tuesday’s reports from Goldman Sachs, JPMorgan Chase, Wells Fargo, and Citigroup. Bank of America is on track for a record year of sales and trading revenue, with double-digit gains in quarterly fees from investment banking and underwriting.
- Morgan Stanley’s investment banking net revenue within its institutional securities unit soared 44%, reaping fees from advising on deals and underwriting stock and debt sales. CEO Ted Pick said he expects investment banking products to remain “generally up and to the right.”
- The nation’s six largest banks collectively earned nearly $41 billion in the third quarter, 19% more than in 2024. Morgan Stanley’s wealth management unit reported record net revenue of $8.2 billion for the third quarter, up 13% from a year ago.
- Amid a cooling job market, a government shutdown, persistent inflation, and near-record stock prices, strong consumer spending and stable deposits “kind of paint a picture of a consistently strong consumer,” Wells Fargo’s Charlie Scharf said.
What’s Next: Conflicting signals make it tough for the Federal Reserve to chart a course. The Beige Book survey on Wednesday included observations of weak demand by businesses, economic uncertainty, and investments in artificial intelligence that reduce staffing needs. Fed policymakers next meet Oct. 28-29.
— Rebecca Ungarino and Janet H. Cho
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United Airlines Sees Strong Fourth Quarter Fueled By Premium Flyers
United Airlines missed revenue expectations for the third quarter, but a better-than-expected fourth-quarter forecast is highlighting positive trends in premium travel. United said it is thriving during an “economically volatile year,” and projects the current quarter will have the highest operating revenue in its history.
- Third-quarter adjusted earnings of $2.78 a share surpassed its own guidance. Revenue of $15.23 billion was up 2.6% from a year ago. United has invested more than $1 billion on improvements in its cabins like Starlink and seat back screens this year, and will spend another $1 billion next year.
- United increased capacity by 7.2% compared with last year’s third quarter, but total revenue per seat mile, a key measure of performance, declined 4.3%. Cost per available seat mile declined 2.8%, and its average fuel price fell 5.1%, to $2.43 a gallon.
- United said its third-quarter loyalty revenue rose 9%, premium cabin revenue rose 6%, and basic economy revenue rose 4%. Rival Delta Air Lines last week beat quarterly expectations, also on strength in its premium options.
- United expects fourth-quarter adjusted earnings of $3.00 to $3.50 a share, above expectations for $2.87 a share, according to FactSet. CEO Scott Kirby said they are well-positioned to be the airline brand-loyal customers choose to fly.
What’s Next: United management will discuss third-quarter financial results and its fourth-quarter and full-year outlook at a conference call later this morning. Both American Airlines and Southwest Airlines will hold their third-quarter earnings conference calls on Oct. 23.
— Janet H. Cho and Callum Keown
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CoreWeave and Nvidia-Backed Start-Up Building AI Data Center
There’s a big data center going up near the energy-rich Permian Basin in West Texas, where CoreWeave is working with an Nvidia-backed start-up called Poolside that plans to build a sprawling data center complex there. It’s another step in the artificial intelligence buildout.
- CoreWeave is going to provide a cluster of Nvidia GB300 NVL72 systems including more than 40,000 graphics processing units, to power research and model training. The GPUs are set to come online beginning in December 2025, Poolside said.
- Separately, CoreWeave plans to provide Poolside with cloud solutions for Project Horizon, the two-gigawatt data center campus located in Texas. CoreWeave will serve as the operational partner and so-called anchor tenant for the first phase of the project.
- That first phase comprises 250 megawatts of gross power with an option to expand capacity by an additional 500 megawatts. CoreWeave already has a presence in the region through its relationship with other data-center operators.
- Evercore ISI analysts identified “several positives” around Wednesday’s announcement including an opportunity to diversify demand beyond Microsoft and OpenAI, two of CoreWeave’s largest partners. CoreWeave could work with other customers, too.
What’s Next: The West Texas site spans 500,000 acres and sits adjacent to the Permian Basin, a major natural gas hub. Poolside says the facility was “the next logical step” for the company.
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—Newsletter edited by Liz Moyer, Patrick O’Donnell, Rupert Steiner