Strong earnings usually lift a stock. This week, they didn't. Two of the most important companies in the AI chip supply chain both reported record quarters, and both stocks ended the week lower. The reason had less to do with how much AI demand there is and more to do with how that demand is being paid for.
The pressure built over three days:
On Wednesday, October 14, 2026, the Bureau of Labor Statistics reported that consumer prices rose 3.7% in September from a year earlier, up from 3.4% in August and above the 3.6% forecast. Gasoline was up 34.2% over the year. Core CPI, which excludes food and energy, also beat forecasts at 2.6%. After the report, futures traders put the odds of a Federal Reserve rate hike at the October 27–28, 2026 meeting at about 54%.
On Thursday, October 15, 2026, the selloff spread into AI-related debt. Reuters reported that bonds of AI cloud provider CoreWeave had fallen to distressed levels. U.S. chipmakers had lost nearly $2.00 trillion in market value since the prior week.
CFRA Research strategist Sam Stovall called CoreWeave "a proxy for other highly leveraged companies." Interactive Brokers' Steve Sosnick said investors are now "questioning the speed, the efficacy and the profitability of the rapid build-out in AI."
Taiwan Semiconductor Manufacturing (NYSE: TSM)
TSMC makes most of the world's most advanced chips, including many used in AI. On October 15, 2026, it reported third-quarter revenue of $46.72 billion, up 41.2% from a year earlier and above its own guidance range of $44.60 billion to $45.80 billion. Net income rose 68.7% to NT$763.06 billion, a record for the sixth straight quarter, and beat the LSEG estimate. Earnings per share were $4.60 per ADR, the U.S.-listed share. High-performance computing, which includes AI chips, made up 68% of revenue. The company's newest 2-nanometer chips reached 8% of wafer revenue.
Guidance was also strong. TSMC expects fourth-quarter revenue of $52.30 billion to $54.30 billion, which would be up about 58% from a year earlier at the midpoint, with a gross margin of 65% to 67%. It plans $60.00 billion to $64.00 billion in capital spending for 2026. CNBC reported that demand for advanced chips still exceeds TSMC's production capacity.
The stock fell anyway, as investors focused on margin pressure. On Friday, October 16, 2026, TSM traded at $412.10 midday, down 2.40% from the prior close of $422.25. The market cap is $2.14 trillion and the P/E ratio is 24.63. The stock is 54.45% above its 52-week low of $266.82 and 15.46% below its 52-week high of $487.47. Analysts remain positive. Needham raised its target to $560.00 from $530.00 on October 15, 2026, and DA Davidson reaffirmed a $500.00 target on October 16. The average target of $569.75 implies about 38.26% upside, and Barclays has the high target at $665.00.
ASML Holding (NASDAQ: ASML)
ASML is the only company that makes the extreme ultraviolet lithography (EUV) machines used to produce the most advanced chips. On October 14, 2026, it reported record third-quarter sales of €11.66 billion. The gross margin was 57.5%, above guidance, and net income was €4.96 billion. The company bought back about €4.10 billion of its own stock during the quarter.
ASML's outlook was even more bullish than its results:
Fourth-quarter sales of €14.20 billion to €15.20 billion, which beat forecasts
Full-year 2026 sales of €44.00 billion to €45.00 billion
Current supply plans for both 2027 and 2028 won't fully meet customer demand
CEO Christophe Fouquet said some customers want to place orders "for 2029 and even 2030."
The stock still couldn't break out of the sector slump. ASML traded at $1,655.74 midday on October 16, 2026, roughly flat for the day. The market cap is $638.15 billion and the P/E ratio is 42.23, much higher than TSMC's. The stock is 75.01% above its 52-week low of $946.11 and 17.21% below its 52-week high of $1,999.96. JP Morgan kept its Overweight rating on October 15, 2026, but trimmed its target to $2,350.00 from $2,400.00. The average target of $2,393.25 implies about 44.54% upside, and Bernstein has the high target at $2,623.00.
Why Good News Didn't Help
The sharpest Reuters analysis came from Equisights Research CEO Parth Talsania. He called the selloff "a rates event in credit clothing," and said CoreWeave is "the most leveraged" example of that rate pressure rather than "the first evidence that AI demand is cracking." He added that "the companies being paid in cash are insulated."
TSMC and ASML both get paid in cash for chips and machines that customers order years ahead. The bigger risk sits with companies that borrow heavily to buy that equipment. If higher rates slow the pace of data-center construction, as Sosnick warned, it could eventually reduce orders from those buyers.
What to Watch
The Fed meeting on October 27–28, 2026 is the next big event for rates. Big Tech earnings in late October will show whether the largest AI spenders are holding to their capital spending plans. Investors will also watch CoreWeave's bond prices as a gauge of stress in AI-related credit.
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