Credit Crisis May Be Noise, but TSMC Earnings Flash Early AI Warning, and Five Defensive Stocks Attract Heavy Option Bets

The stock market took another hit following concerns over regional bank bad loans and potential defaults, further confirming the technical weakness we highlighted on Tuesday. Although banking earnings so far suggest a resilient economy, the recent stress among smaller lenders has triggered caution across sectors. Meanwhile, TSMC posted solid results but also raised concerns that AI-related spending may slow, which hardly justifies its 23% rally since the second quarter. Investors should now adopt a more cautious stance as more AI-driven tech firms report results, while several defensive stocks are seeing unusual call option activity suggesting selective bullish sentiment.

Although Trump downplayed the latest U.S.-China tension, both the S&P 500 and Nasdaq 100 remain below last Friday’s highs, which serve as key resistance levels as investors focus on corporate fundamentals. The sudden emergence of regional bank credit risk may sound alarming, but it appears to be an isolated issue rather than a systemic threat. Even if it worsens, it could present a dip-buying opportunity similar to the post-collapse period of Silicon Valley Bank. The economy remains robust, large banks have delivered stronger-than-expected earnings, and looser regulations have not yet created a credit bubble. Gold’s overwhelming rally amid expectations of Fed rate cuts now looks more speculative than defensive, shifting from a traditional hedge to a momentum play.

TSMC’s Thursday earnings, while seemingly strong, were less optimistic beneath the surface. Revenue and profit exceeded forecasts, and a 60% gross margin was encouraging, but the guidance was notably cautious. The chipmaker projected fourth-quarter revenue between $32.2 and $33.4 billion, translating to roughly 22% year-over-year growth or about -1% Q/Q using median estimates. This marks a clear deceleration compared with previous quarters, a concern given TSMC’s central role in the AI boom. The fourth quarter is typically the strongest period, driven by consumer electronics sales during the holiday season—particularly this year’s strong iPhone 17 demand. Yet, the mild outlook implies that AI-related chip orders may be softening. Considering that OpenAI recently announced a trillion-dollar chip deal not yet reflected in TSMC’s guidance, an early sign of AI slowdown could be forming—a potential turning point for AI enthusiasts.

With a solid economy but possible moderation in AI demand, investors may increasingly focus on defensive plays. We identified five value-oriented names showing constructive technical setups and significant bullish option positioning that could benefit in this environment.

Costco (COST) shares dipped after the regional bank turmoil but maintained a strong technical structure, with the 3-day moving average above both the 7-day and 10-day averages—a classic bullish setup. The stock now faces a critical test: confirming a higher low to extend the uptrend or breaking lower into reversal territory. Given solid consumer spending and its defensive profile, the bullish scenario looks more likely. Options traders appear to agree, with 512 contracts open for the $950 call expiring next Friday—double the volume of at-the-money contracts.

Visa (V) experienced a similar decline on fears of rising credit delinquencies but has now returned to key support. The broader credit risk remains contained, and Visa’s focus on average consumers limits exposure to potential defaults. A technical rebound appears likely, supported by nearly 1,000 contracts for the $355 out-of-the-money call expiring next Friday—the largest position on record, indicating expectations of a short-term bounce.

AT&T (T) has rebounded from recent lows, with the 3-day moving average attempting to break above the 7-day and 10-day averages, hinting at a developing bullish trend. Traders have made aggressive bets, with 5,416 contracts on the $30 call expiring next Friday, implying expectations of a 15% rally. As the broader tech sector cools, this undervalued telecom giant could attract renewed attention.

Coca-Cola (KO) remains a classic defensive play, maintaining a bullish structure with short-term averages stacked upward. Traders have accumulated thousands of call options ranging from $68 to $73 for next Friday’s expiration, likely anticipating a rebound ahead of earnings. With shares near their lowest level since February and mean reversion in play, a short-term recovery looks promising.

Ford (F) has also bounced from key support, with its short-term moving averages aligning toward a bullish crossover. The automaker could benefit from Trump’s focus on domestic manufacturing, and the recent pullback offers an attractive entry point. Traders appear confident, with 17,000 call contracts for $12 and $12.5—twice the at-the-money volume—signaling a strong bullish outlook ahead.