AI and Data Center Chip Demand Confirmed by Taiwan Semiconductor Results and Guidance
Netflix earnings on deck
Market Recap
Markets opened with the uncertainty of Fed Chair Powell’s tenure hanging over them, only to be met with a mid-session “He's doing a lousy job. But no, I'm not talking about that. We get, fortunately, we get to make a change in the next, what, eight months or so, and we'll pick somebody that's good,” from President Trump.
That statement was enough to calm markets.
All major equity indexes bounced off midday lows to close higher, with the Nasdaq Composite gaining 0.25%, the S&P 500 adding 0.32% and the Dow rising 0.53%. Small caps led the way as the Russell 2000 closed 0.99% higher. With the exception of Energy, all sectors were higher, ranging from 0.05% (Utilities) to 1.24% (Healthcare) after a strong pre-market earnings release from Johnson & Johnson (JNJ) helped lift the sector.
The advance/decline line for holdings of the SPDR S&P 500 Trust ETF (SPY) was 347/156 and the top ten contributors to return included 4 of 7 Mag 7 names, Johnson & Johnson, Eli Lily (LLY), AbbVie (ABBV), Advanced Micro Devices(AMD), and Blackrock (BLK) accounted for just over 75% of the fund’s 0.33% result. With Fed personnel issues resolved (for the meantime), we saw the Cboe Market Volatility index (VIX) retreat about 0.20 points to 17.16 and gold pick up about $20 to $3,345.90/oz.
The Tematica Select Model Suite saw mostly positive results, with the exception of Rebuilding America (BUILD),Digital Lifestyle (DLIFE), EV Transition (EVTRANS), and CHIPs Act (CHIPS). Leadership across the suite came from Nuclear Energy & Uranium (NUKE) and Space Economy (SPACE).
AI and Data Center Chip Demand Confirmed by Taiwan Semiconductor Results and Guidance
Equity futures point to a muted open this morning ahead of today’s June Retail Sales report and the latest round of comments from Fed officials following yesterday’s softer-than-expected June Producer Price Index (PPI) report. Following the uptick in the June Consumer Price Index figures the day before, we suspect aggregate comments pointing to a Fed that will want to see more data as it determines when a rate cut could be appropriate. Yesterday, Federal Reserve Bank of Atlanta President Raphael Bostic shared, “We are seeing things underlying in the economy that suggest that inflation pressures are up and that’s really a source of concern,” adding that when it comes to a rate cut, “Right now I would wait.”
We are also seeing a mixed bag of quarterly earnings reports with beverage and snack company PepsiCo (PEP) surprising to the upside, while robust results from Taiwan Semiconductor (TSM) lift chip stocks due to its stronger-than-market-consensus outlook for the current quarter. To that we can add United Airlines (UAL) shared travel demand has picked up since the beginning of July, but those positives are being counterbalanced by health insurer Elevance (ELV) lowering its annual profit forecast as it expects elevated medical costs in its government-backed plans to persist and reports the European Union is preparing a list of potential tariffs on US services, as well as export controls, as part of its possible retaliation if trade talks with Washington fail.
Digging into end-market results from Taiwan Semiconductor, we find strong support for our Digital Infrastructure model. The company’s High-Performance Computing (HPC) segment, which housed AI and data center markets, climbed to 60% of revenue in Q2 2025 compared to 52% in the year-ago quarter. Cutting those figures from a different angle, we find HPC revenue soared more than 65% on a year-over-year basis and just shy of 20% compared to Q1 2025. TSM’s other core end market, smartphone, also rose double-digits on both a sequential and year-over-year basis, as did its IoT business. With TSM guiding current quarter revenue to $31.8- $33.0 billion, up almost 38% on a year-over-year basis, it’s safe to say that end market strength, especially for AI and data center, is poised to continue.
After today’s market close, the spotlight will be on June quarter results from Netflix (NFLX), and what they show about its growing focus on advertising revenue. After watching the new trailer for the final season of Stranger Things, we’ll selfishly be interested in what is said about its content slate for 2H 2025. Content is, after all, king when it comes to attracting subscribers.
The Strategies Behind Our Thematic Models
Aging of the Population - Capturing the demographic wave of the aging population and the changing demands it brings with it.
Artificial Intelligence – Software, chips, and related companies that facilitate the collection and analysis of large data sets and autonomous generation of solutions given non-machine language prompts.
Cash Strapped Consumers - Companies poised to benefit as consumers stretch the disposable spending dollars they do have.
CHIPs Act – Capturing the reshoring of the US semiconductor industry and the $52.7 billion poised to be spent on semiconductor manufacturing.
Cloud Computing – Companies that provide hardware and services that enhance the cloud computing experience for users, such as co-location, security, and edge computing.
Core Holdings – Companies that reflect economic activity and are large enough to not get pushed around by day-to-day market trends. Low-beta, large-cap names able to better withstand economic turmoil.
Cybersecurity - Companies that focus on protecting against the penetration of digital networks and the theft, ransom, corruption, or destruction of data.
Data Privacy & Digital Identity - Companies providing the tools and services that verify authorized users and safeguard personal data privacy.
Digital Infrastructure & Connectivity - Companies that are integral to the development and the buildout of the infrastructure that supports our increasingly connected world.
Digital Lifestyle - The companies behind our increasingly connected lives.
EPS Diplomats - Profitable large capitalization companies proven to produce above-average EPS growth and provide investors with the benefit of multiple expansion.
EV Transition - Capturing the transition to EVs and related infrastructure from combustion engine vehicles.
Guilty Pleasure – Companies that produce/provide food and drink products that consumers tend to enjoy regardless of the economic environment and potential long-term health hazards associated with excessive consumption.
Homebuilding & Materials – Ranging from homebuilders to key building product companies that serve the housing market, this model looks to capture the rising demand for housing, one that should benefit as the Fed returns monetary policy to more normalized levels.
Market Hedge Model – This basket of daily reset swap-based broad market inverse ETFs protects in the face of market pullbacks, overbought market technicals, and other drivers of market volatility.
Nuclear Energy & Uranium – Companies that either build and maintain nuclear power plants or are involved in the production of uranium.
Luxury Buying Boom - Tapping into aspirational buying and affluent buyers amid rising global wealth.
Rebuilding America - Turning the focused spending on rebuilding US infrastructure into revenue and profits.
Safety & Security – Targeted exposure to companies that provide goods and services primarily to the Defense and security sectors of the economy.
Space Economy – Companies that focus on the launch and operation of satellite networks.
The Strategies Behind Our Dividend Income Models
Monthly Dividend Model – Pretty much what the name indicates – this model invests in companies that pay monthly dividends to shareholders.
ETF Dividend Model – High-yielding ETFs that provide a range of exposures from domestic equities, international equities, emerging market equities, MLPS, and REITs.
ETF Enhanced Dividend Model – A group of high-yielding ETFs that utilize options to enhance yield through collecting option income.
Don’t be a stranger
Thanks for reading and if you have a suggestion for an article or book we should read, or a stream we should catch, email us at info@tematicaresearch.com. The same email works if you want to know more about our thematic and targeted exposure models listed above.