TSMC’s AI Surge, Jobless Claims Fall & Fed Faces Inflation Tug-of-War

The recent confluence of corporate earnings—most notably TSMC’s—and labor market data suggests both strength and fragility in the current U.S. economy and global tech sector. TSMC’s fourth-quarter 2025 net profit surged roughly 35% year-over-year, reaching T$505.7 billion (~US$16.0 billion), as demand for leading-edge semiconductors (3nm, 5nm, etc.) tied to AI usage regions continues to outpace supply constraints. This performance exceeded consensus estimates and underscores how the AI megatrend remains a dominant driver of capital investment and corporate optimism within semiconductors.

On the U.S. labor front, jobless claims dropped unexpectedly to 198,000 for the week ending January 10, 2026, lower than economists’ expectations and the prior week’s level. However, hiring remains sluggish and labour market gains are modest—nonfarm payrolls grew by 50,000 in December, while unemployment ticked down slightly. The Federal Reserve’s Beige Book describes employment as “mostly unchanged,” with many firms using temporary workers to flex in uncertainty.

Investors appear to have responded favorably: financials and tech rebounded, while oil and gold saw softened demand, reflecting easing geopolitical risk premiums, especially as tensions over Iran cooled somewhat. TSMC’s strong performance lifted not only its own shares but dragged up semiconductor-equipment suppliers and broader tech indices. At the same time, safe haven assets such as gold retreated from recent highs.

Strategically, several implications emerge. First, semiconductor supply chain investment, especially in the U.S., is likely to intensify: TSMC is expanding capacity domestically and in Arizona, including plans for advanced packaging, to better serve local demand and manage trade risks. Second, the Fed’s stance is likely to remain cautious. Stable labor market conditions with subdued hiring reduce pressure to ease rates but raise the risk that inflation remains above target. Third, valuation discipline will be vital: the tech sector’s upside has started to be called into question, and upwards earnings surprises will be required to sustain multiples. Finally, geopolitical and policy risks—trade, tariffs, regulation—remains a source of uncertainty that could exacerbate negative tails.

Open questions that remain include whether AI demand is sustainable at current intensities (i.e., will enterprise capex continue accelerating), whether U.S. expansions of semiconductor capacity will be completed on schedule and cost, and whether labour market cooling might lag or precede declines in inflation. Also, how Fed communication handles rate path expectations in light of this data remains critical.