Semiconductor Earnings Set to Rise 136% as AI Outpaces S&P 500

Chip profits are still far ahead of the market

Analysts expect chipmakers to report another quarter of profit growth that the rest of corporate America cannot match. LSEG data show U.S. semiconductor companies on track for roughly 136% year-over-year earnings growth in the third quarter. The S&P 500 as a whole is expected to grow about 31%.2721 Both numbers are huge. The pattern that matters most in this earnings season, though, is a slowdown at the very top: chip profit growth is coming down from about 158% in the second quarter.2724

The coverage agrees on the numbers but frames them differently. One account leads with how far chips are pulling ahead of everything else.21 Another leads with the cooling, describing chipmaker growth as easing from a faster pace.27 Both are accurate. The useful takeaway is that the AI hardware trade has moved from shock to scrutiny. Investors are no longer surprised that chip profits are huge. They are asking how long the growth can last and what it is worth.

The broader index depends heavily on the same theme. LSEG's Tajinder Dhillon said the tech sector, together with Alphabet, Amazon and Meta Platforms, should account for about two-thirds of the S&P 500's expected gain.27 The blended third-quarter growth estimate is 30.6%, up from 15.1% at the start of the year. It is still well below the second quarter's 53.7%, and growth is forecast to slow to 28.9% in the fourth quarter and 19.8% in the first quarter of 2027.2724

Samsung and TSMC show the size of the boom

The clearest evidence so far comes from Asia. Samsung Electronics estimated third-quarter operating profit at 107.4 trillion won, up 782.5% from a year earlier. It would be the first time a South Korean company has topped 100 trillion won in one quarter.29 Revenue rose an estimated 127% to about 195 trillion won, and Samsung has now set sales and profit records four quarters in a row.2923 Dollar conversions in the coverage range from about $80.1 billion to $80.6 billion depending on the exchange rate used, but every outlet agrees it is a record.292621

The driver is memory. High-bandwidth memory for AI accelerators is in short supply, and that shortage has pushed up prices for ordinary DRAM and NAND flash as well.2926 Counterpoint Research data show Samsung's HBM market share rising from 21% in the first quarter to 33% in the second. Samsung's HBM4 chips are expected to go into Nvidia's Vera Rubin accelerator.25 The shortage also has a downside. Samsung's own mobile division now pays more for the same memory, a cost analysts say is getting harder to absorb.29

TSMC has already disclosed record revenue. Third-quarter sales came to about NT$1.49 trillion, up roughly 51% year over year and above the top of the company's July guidance.68 It reports full results on October 15. An LSEG SmartEstimate from 16 analysts expects net profit of about NT$746.3 billion, up 65%. That would be TSMC's sixth straight quarterly profit record.810

In the U.S., Broadcom's fiscal third-quarter revenue rose 86% to $29.6 billion, and its AI semiconductor revenue jumped 221% to $16.7 billion.21 Micron gave current-quarter guidance above expectations and said long-term customer supply agreements had reached $32 billion.24 Taken together, these results show a boom spread across the supply chain, from processors and memory to networking and manufacturing capacity, rather than a story about one company.21

Strong profits haven't stopped stock declines

The market is less settled than the earnings. On October 8, a report questioning OpenAI's revenue path pulled the Nasdaq Composite down 1.25% and chip stocks down 3.4%.6 That shows how sensitive the sector still is to doubts about whether the companies buying AI hardware can pay for it.21

TSMC shows the gap between results and stock prices. One analysis has its U.S.-listed shares up about 49.6% this year against an 82.4% gain for the iShares Semiconductor ETF. It blames the gap on margin worries: TSMC guided gross margin to 65%–67%, below the 67.7% it posted in the second quarter, partly because the 2-nanometre ramp is expected to dilute margins.5 Reuters, looking at TSMC's Taipei-listed shares, described a 63% gain as broadly in line with the local market.8 Whether TSMC looks like a laggard depends on the benchmark.

Analyst price targets for TSMC are far apart. One aggregator puts the average at $883, implying about 95% upside.7 Another analysis cites a consensus of about $555, or roughly 23% upside.5 A gap that wide suggests analysts disagree sharply about how much of the AI cycle is already in the share price. Options markets imply a move of about 4.3% in either direction around the TSMC report. The stock fell 3.8% after its last results despite beating estimates.6

Selling continued on Monday. The Nasdaq closed 0.7% lower, the iShares Semiconductor ETF fell 2.6% and TSMC's U.S. shares slipped about 2%.115 The decline came even though the latest revenue data still looked strong.

Bitcoin is stuck in a range

Crypto has not gained from the AI earnings surge, but it has felt the pullbacks. Bitcoin has spent weeks between roughly $82,000 and $87,000. It met heavy selling above $87,000 several times since late September, even as the S&P 500 set records.13 When the OpenAI revenue concerns hit tech stocks, bitcoin fell toward $82,000 alongside geopolitical tension and rising oil prices, and nearly $1 billion in crypto positions were liquidated.20

The overlap between chips and crypto is also getting more direct. When Asian chip stocks sold off, tokenized bets on SanDisk saw more liquidations than XRP, and about $800 million was wiped out across the market.11 As tokenized stocks grow, chip-stock swings increasingly hit crypto traders' leveraged positions directly, not just through general risk sentiment.

Bitcoin's own price is now driven more by interest rates than by AI. It closed the week down 3.2% but held weekly support near $82,500, which kept it out of its earlier 2026 range of $60,000 to $80,000.14 On Tuesday it rose more than 2% to above $83,500, even though U.S. spot bitcoin ETFs saw $65.4 million in outflows on Monday. Strategy added 250 bitcoin to its holdings.19 At one point bitcoin was reported to be moving independently of falling Korean stocks and Nasdaq futures.11 Bitfinex analysts expect it to stay between about $81,300 and $84,500 until the inflation data come out.19

Rates and energy prices weigh on crypto and expensive chip stocks alike. Earlier this month the 10-year Treasury yield was around 5.26%.13 WTI crude was trading above $92 a barrel on Monday.11 Earlier in the cycle the Fed raised rates by 25 basis points.20 Long-duration growth assets have trouble rising in that environment, however strong their earnings.

What to watch next

The next few days will test both the AI story and interest-rate expectations. ASML reports before the U.S. open on October 14, the same morning as September's consumer price index. TSMC follows on October 15, and the Federal Reserve meets on October 27–28.6 Lam Research reports on October 21.3

This is an analytical reading: the earnings question is mostly settled, and what remains is how much those earnings are worth. Chip profits are compounding at rates the broader market cannot match, and Samsung's and TSMC's early figures confirm it.298 But the pace is slowing, upgrades to earnings estimates are losing momentum, and one research chief compared the shift to a car slowing from 150 to 100 miles per hour.24 For chip stocks, guidance on fourth-quarter demand, margins and 2027 spending will matter more than the third-quarter figures themselves.6 For bitcoin, the rate outlook matters more than AI, and Wednesday's inflation report will likely decide whether it breaks out of its range.