Adaptability Is the New Job Security and 4 More Future AI Trends from EY's Global Chief Innovation Officer

TSMC’s recent blowout earnings and raised spending forecast have reignited interest in the AI trade. The company reported a 35% year-over-year profit increase in its fourth quarter, with its high-performance computing division driving most of the sales. This has led to an optimistic outlook for the broader AI sector. Analysts are now boosting their ratings for AI-related companies like Broadcom and AMD.

TSMC is the world’s largest contract chipmaker and produces the advanced AI chips used by companies like Nvidia and AMD. With AI demand surging, TSMC has announced a significant increase in capital expenditures, projecting $52 billion to $56 billion in 2026 spending. This is up from $40.9 billion in 2025 and signals confidence in long-term AI compute demand.

In parallel, C3.ai reported mixed results in its most recent quarter. The company exceeded expectations with earnings of -$0.25 per share, versus a forecast of -$0.33, and revenue of $75.1 million. However, its stock closed at $13.56, down 4.17%, underperforming the broader market and its peers. This decline highlights the volatility in the AI software and enterprise AI segments.

TSMC’s strong performance has lifted sentiment across the sector. Major AI chipmakers like Nvidia and Broadcom rose on the same day, with the VanEck Semiconductor ETF hitting a 52-week high. Analysts from major banks and brokerages, including Wells Fargo and JPMorgan, have upgraded their ratings for semiconductor plays, citing robust AI demand and the transition from training to inference applications.

Why Did This Happen?

TSMC’s results reflect the broader strength in AI infrastructure. The company raised its five-year growth forecast for AI accelerators, emphasizing that the sector is moving from training to inference applications. This transition is expected to drive demand for more efficient and scalable chip solutions, which TSMC is well-positioned to supply.

The chipmaker’s capital expenditure increase also signals continued investment in leading-edge manufacturing. Analysts noted that TSMC is responding to customer demand for more capacity and has signaled confidence in AI demand for years to come. This has led to stronger gross margins and improved investor sentiment.

How Did Markets React?

Market reactions were largely positive in the wake of TSMC’s report. The company’s shares rose over 5%, and the VanEck Semiconductor ETF hit a new high. Other AI-related plays also saw gains, with Nvidia and Broadcom both rising more than 1%.

In contrast, C3.ai’s stock struggled, falling short of expectations and underperforming against industry benchmarks. While the company highlighted strong cash reserves and growing subscription revenue, its operating and net margins remain negative. This has raised questions about its ability to sustain growth in a competitive market.

What Are Analysts Watching Next?

Analysts are closely watching TSMC’s guidance for 2026 and beyond. The company’s strong outlook for AI accelerators has led several analysts to upgrade their ratings for semiconductor stocks, including Broadcom and AMD. JPMorgan and Barclays have both reiterated their outperform ratings for TSMC, citing improved gross margins and strong growth prospects.

For C3.ai, the focus is on its ability to scale enterprise AI adoption and maintain its partnerships with major cloud providers like Microsoft and AWS. Analysts are also tracking its cash position and guidance for 2026 revenue, as the company projects $289.5 million to $309.5 million in revenue for the year.

TSMC’s strong performance and the broader AI industry’s momentum suggest continued investment in AI infrastructure. As demand shifts from training to inference, companies that can deliver scalable and efficient solutions will likely benefit. This has led to renewed optimism among investors and analysts alike.

The AI sector’s growth is also being shaped by enterprise adoption. C3.ai and other software firms are focusing on moving AI from experimentation to full-scale deployment. This transition is expected to drive demand for AI platforms that support secure and flexible deployment across different environments.

Overall, the AI sector remains a key focus for investors and analysts. With TSMC leading the charge and companies like C3.ai adapting to changing market dynamics, the path forward will depend on continued demand, innovation, and execution in both hardware and software segments.