Chip Earnings Set to Jump 136% as AI Boom Outruns the S&P 500

The gap is wide, and it is starting to narrow

Third-quarter earnings season has barely started, and the main story is already clear: chipmakers are taking the largest share of the profits from the AI buildout. LSEG data shows analysts expect US semiconductor companies to grow third-quarter earnings by about 136% from a year earlier, against roughly 31% for the S&P 500 as a whole.16 Reports drawing on the same LSEG figures put blended S&P 500 growth at 30.6%. They also say the technology sector plus Alphabet, Amazon and Meta Platforms should account for about two-thirds of the index's gain.46

The 136% figure is also a slowdown. Chip-sector profit growth was about 158% in the second quarter, and Nick Raich of Earnings Scout says the pace of upward estimate revisions has begun to ease.46 He compared the AI infrastructure trade to a car slowing from 150 miles per hour to 100: still fast, but less steep than before.4 The broader index shows the same pattern. Forecasts call for S&P 500 growth to ease from 53.7% in the second quarter to 28.9% in the fourth and 19.8% in the first quarter of 2027.6

Not every forecaster arrives at the same figure. Zacks projected semiconductor-industry earnings growth of 85.5% on revenue up 62.8%. That is well below the LSEG number, though both point the same way.16 The gap probably comes from different definitions of the industry and different weighting, so readers should treat any single growth rate as rough. Every forecast agrees, though, that chips are growing several times faster than the market.

Memory and foundry results confirm the demand

The strongest support for the forecasts so far comes from Asia, where some results are already in. Samsung Electronics guided to third-quarter operating profit of 107.4 trillion won, about $80 billion, up 782.5% from a year earlier. Revenue rose an estimated 127% to 195 trillion won.5 It is the first time a South Korean company has topped 100 trillion won in quarterly operating profit, and Samsung's fourth straight quarter of record sales and profit.5 The figure also beat a market estimate of 106.1 trillion won. Demand for high-bandwidth memory used in AI accelerators drove the result.4

Estimates of how large Samsung's profit is in dollars vary a little, from about $80.1 billion to $80.6 billion, depending on the exchange rate used.58 More striking is the margin. Brokerage estimates cited in Korean coverage put the chip division's operating margin at around 72% to 75%, with DRAM margins possibly above 80%.9 Margins like that usually mean buyers are short of supply, not just that demand is strong.

TSMC, the contract manufacturer behind most of the world's advanced AI chips, has already published its quarterly revenue in monthly reports. Third-quarter sales came to about NT$1.49 trillion, roughly $46.71 billion, up around 50% and above the NT$1.46 trillion analysts had expected.1318 An LSEG SmartEstimate puts net profit up 64%, which would make this TSMC's sixth straight record profit quarter.13

US companies are telling a similar story. Broadcom's fiscal third quarter brought revenue of $29.6 billion, up 86%, and AI semiconductor revenue of $16.7 billion, up 221%.1 Micron gave current-quarter guidance above expectations, and its customer commitments under long-term supply agreements reached $32 billion.4 Taken together, the AI money is reaching every part of the chip supply chain: processors, memory, networking and manufacturing.

Why the stocks aren't keeping up

The central tension this season is that record profits have not reliably lifted share prices. VanEck data showed semiconductor earnings up 131% in the second quarter even as its semiconductor ETF, SMH, fell 23% over the same period.10 That happened even though the fund was up 82.3% for the year as of June 30.10

The pattern has held into October. On October 8, chip stocks fell with other AI-linked shares after a report questioned OpenAI's revenue trajectory.1 TSMC's US-listed shares fell about 3% in one recent session, Nvidia about 2.9% and Intel more than 5%.19 Some coverage pointed out that TSMC's record sales arrived just as chip stocks slipped on fears of an AI bubble.18

The sector is not simply falling, though. The iShares Semiconductor ETF, SOXX, gained 11% in September and another 3.6% in the first two trading days of October. It now trades at about 43 times earnings.11 Our reading is that investors are not rejecting the AI profit story. They are asking for proof each quarter, and at these valuations a merely good number can still hurt a stock. A useful example: after each of TSMC's last two earnings beats, the stock fell an average of 3.61% the next day.19

So the outlook for each company will matter more than its headline growth figure. Before TSMC's report, analysts say gross margin, high-performance computing revenue and full-year guidance will count for more than revenue, which is already public.1218 TSMC guided gross margin to 65% to 67% after posting 67.7% in the second quarter.18 It has raised its full-year revenue outlook twice this year, most recently to at least 40% growth. Commentators warn that simply repeating that target, or raising capital spending without raising revenue guidance, could weigh on the shares.12

Bitcoin is moving with rates and oil, not chips

Crypto has not shared in the earnings boom. Bitcoin was around $83,600 on Monday after falling 3.1% the previous week. US spot bitcoin ETFs saw $681.1 million in net outflows over the week, ending a three-week run of inflows.30 The token dropped to $80,427 on October 8 before recovering. One analysis tied the rebound to falling Brent crude after President Trump pledged not to attack Iran before the November 3 midterms.26 Crypto liquidations topped $1.1 billion during the week, and coverage pointed to expectations of further Federal Reserve tightening.21

Crypto's split from stocks is the clearest sign of how this market is divided. On October 6, the S&P 500 hit a record while bitcoin stayed stuck in a narrow range for roughly a fourth straight week.25 The 10-year Treasury yield was around 5.24%, and bitcoin was still far below its all-time high of about $126,198.24 Analysts describe a range with support between $80,000 and $82,000 and resistance between $86,000 and $88,000.29 Others say a break below $80,000 could open the way to the mid-$70,000s.28

Our reading is that bitcoin is acting like an asset that depends on interest rates, with oil feeding into inflation expectations. It has no earnings of its own to point to. Chip stocks at least have record profits to fall back on when the macro mood turns. Bitcoin has only fund flows and the Fed's rate path, which is why US consumer price data on Wednesday, October 14, is seen as the week's key test for crypto.28

The week ahead

The calendar is unusually busy. ASML reports on October 14, TSMC on October 15 and Lam Research on October 21.15 Intel follows on October 22, and Nvidia is not expected until November 18.14 Samsung will release full third-quarter results at the end of October, along with more detail on its memory and foundry businesses.9 The FOMC meets October 27–28.28

The hard numbers support the claim that semiconductor profits are growing much faster than the rest of the market. The outlook is less certain. Growth is slowing from extreme levels, estimate revisions are losing pace, and investors have shown they will sell on any doubt about AI spending, even mid-boom. TSMC's report should be the clearest early test. It shows whether production is still growing, and that matters more than any company's forecasts. Our view is that chip earnings will remain the market's main driver this quarter. The real question for share prices is no longer whether profits grow, but by how much they beat already high expectations.