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Matt Phillips

Data center stocks knocked back amid China stress

The buy-everything-data-center-related trade is having a rough ride Tuesday, with Goldman Sachs’ themed basket of AI data center stocks dropping 1.5% in early trading after soaring more than 3.5% to start the week.

That’s partially because some suppliers of bits and bobs needed to fit out the hangar-like concrete structures selling computing power for AI are still exposed to risks of the China-US trade war, which seems to be flaring anew.

For instance, while most of the switches and routers Arista Networks sells are made in Malaysia, Vietnam, and Mexico, it also gets some products directly from China. The company is also reliant on supplies of some critical metals, exports of which China is clamping down on.

Such actions, the company has previously warned, could lead to disruptions to supplies of components it needs, manufacturing delays, and inventory shortages.

Other related stocks slumped in early trading, including hard disk data storage makers Seagate Technology Holdings and Western Digital — also exposed to Asian supply chains — and server maker Dell.

Chip giants Nvidia and Broadcom were also down more than 3% each after Advanced Micro Devices announced a new deal to deploy its chips in Oracle data centers.

While previous announcements to that effect lifted the AI sector as a whole, the AMD deal wasn’t enough offset the pall cast by the renewed China stress.

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Tasha Matsumoto
10h
Chipmakers power stock gains

TSMC’s blowout earnings fueled a return to the AI trade.

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Max Knoblauch

US airlines climb as oil plunges following Trump’s softer position on Iran intervention

West Texas Intermediate crude futures were down around 4.7% Thursday afternoon as President Trump appeared to soften his stance on further US strikes against Iran.

That sent US airline stocks climbing as investors priced in lower fuel costs. Shares of United Airlines, Delta Air Lines, and American Airlines all rose about 3% on Thursday. Earlier this month, airline stocks were boosted when investors appeared to price in some medium-term relief on the possibility of Venezuela’s reserves becoming more developed.

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Luke Kawa

TSMC’s blowout quarter, guidance, and capex plans send AI to the sky

TSMC’s stellar Q4 results, bright Q1 guidance, and willingness to spend way more on capital expenditure than analysts had anticipated this year are giving a big jolt to the AI trade.

“We believe the strong 1Q26 guidance has likely surprised many investors to the upside,” wrote Needham analyst Charles Shi, who boosted his price target on the stock to $410 from $360 in the wake of these results. “Solid CapEx guidance should also lead to even stronger wafer fab equipment (WFE) outlook for 2026 and beyond.”

Beyond TSMC, the results are boosting other stocks tied to AI:

No single quarter of corporate earnings or guidance is sufficient proof against (or in favor of!) any kind of AI bubble, particularly when the biggest drivers of capex have consistently said the risk is spending too little rather than too much.

But TSMC is keenly aware of the potential downside of overextending itself into a future air pocket in demand, and has engaged in long-term planning and channel checks downstream to better understand the market for its products.

If TSMC’s capex plans aren’t executed well, it would be a “big disaster” for the company, CEO CC Wei said on the conference call.

But engaging with customers over their production needs for new wafers is being done “at least two to three years in advance,” he added.

“I spent a lot of time in the last three, four months talking to my customers and then my customers’ customers” to make sure that demand is real, said Wei, who came away “quite satisfied with the answer” and was shown “the evidence that the AI really helped their businesses.”

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Matt Phillips

Talen soars on new power plant purchases in giant grid feeding Data Center Alley

Talen Energy soared early Thursday after the Houston-based utility said it had bought power plants in the massive PJM exchange, which has seen rising consumer prices linked to AI infrastructure.

The Wall Street Journal reported Monday on how the run-up in prices has been a growing political headache for data center developers.

Yesterday, PJM cut its forecast for peak summer of 2027 demand, suggesting that data center electricity demand going forward may have been overstated.

But Talen’s purchase of natural gas-fueled plants — one in Indiana and two in Ohio — for $3.45 billion in cash and stock suggests the company remains bullish on the AI build-out, especially within the 13-state PJM grid. The nonprofit power grid serves 67 million people from New Jersey to Kentucky, and includes key areas of relatively high data center density such as Ohio and Virginia.

Early Thursday, Talen shares were up by the most since last July. This reaction to the latest in a string of acquisitions suggests Talen executives have an incentive to stay on offense.

Talen Energy Continues Portfolio Expansion with Acquisition of Additional High-Quality PJM Natural Gas Assets from Energy Capital Partners

The Wall Street Journal reported Monday on how the run-up in prices has been a growing political headache for data center developers.

Yesterday, PJM cut its forecast for peak summer of 2027 demand, suggesting that data center electricity demand going forward may have been overstated.

But Talen’s purchase of natural gas-fueled plants — one in Indiana and two in Ohio — for $3.45 billion in cash and stock suggests the company remains bullish on the AI build-out, especially within the 13-state PJM grid. The nonprofit power grid serves 67 million people from New Jersey to Kentucky, and includes key areas of relatively high data center density such as Ohio and Virginia.

Early Thursday, Talen shares were up by the most since last July. This reaction to the latest in a string of acquisitions suggests Talen executives have an incentive to stay on offense.

markets
Max Knoblauch

Spotify increases its US subscription prices for the third time in 3 years

The cost to stream music and podcasts ad-free on Spotify is going up again in the US next month, marking the third price hike by the company since 2023.

The monthly cost of individual premium plans will increase from $12 to $13, while family plans will jump from $20 to $22. Spotify last raised US prices in July 2024 (and 2023 before that). This is the first price hike under the tenure of new co-CEOs Gustav Söderström and Alex Norström, who together replaced Daniel Ek earlier this month.

Spotify shares climbed about 3% after the market opened on Thursday, but has since fallen in early trading.

When it reported third-quarter earnings in November, the streamer said its global paid subscriber count had climbed to 281 million — 12% year-over-year growth. At the same time, ad-supported revenue fell 5.5% despite an 11% jump in monthly active users.

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