AI is still pressing the gas pedal, but consumers have already started to ease off

The most worth putting together today isn’t two sets of similar data, but two completely different worlds.

The first world is TSMC.

TSMC’s net profit in the second quarter was about TWD 706.6 billion, up 77% year over year; revenue in USD was $40.2 billion, with a gross margin of 67.7%. The company not only raised its outlook for this year’s USD revenue growth to slightly more than 40%, but also increased its capital expenditure guidance to $60 billion to $64 billion.

This means that, at least for now, AI demand hasn’t started hitting the brakes. What TSMC is seeing isn’t orders backing off, but capacity that’s still not enough—so it has to spend more to expand.

The second world is American consumers.

In June, U.S. retail sales rose only 0.2% versus May, well below May’s revised increase of 1.0%. Sales at clothing and accessory stores fell 0.3%, while dining only rose 0.1%. Consumption hasn’t disappeared, but the pace has clearly slowed.

When you put these two things together, you see an interesting gap: companies are making huge investments in AI, while households have started to become cautious about everyday spending.

However, it’s too early to say that U.S. consumption is about to collapse.

After excluding gas stations, June retail sales still increased 0.7%; online sales rose 1.9%, boosted by promotional activity. The number of initial jobless claims reported the same day also fell to 208k, the lowest in ten weeks, suggesting companies are still not conducting large-scale layoffs.

So the more reasonable interpretation tonight isn’t that the economy is weakening across the board, but that growth is becoming more concentrated.

The AI supply chain is still expanding capacity, and the labor market still has support. But household consumption isn’t as aggressive as it was in the previous month. As long as jobs remain, consumption slowing down doesn’t necessarily turn into a recession right away; but if hiring, income, and service consumption all weaken together next, that’s when things will truly change.

For the market, the next question can’t be only whether AI demand is strong. It has to be whether these massive capital expenditures will ultimately translate back into enough revenue and cash flow.

TSMC’s earnings report delivered a strong scorecard for demand. But Asian semiconductor stocks fell broadly today, reminding us of one thing: strong company performance doesn’t necessarily mean the stock price will immediately reflect it. When the market’s expectations are already very high, good news sometimes is only enough to reach the entry threshold.

5 other things to watch tonight

1｜U.S. retail sales slow down

U.S. June retail sales rose 0.2% month over month, while May’s increase was revised to 1.0%. After excluding gas stations, sales still rose 0.7%, making it closer to consumption decelerating rather than contracting across the board. The retail data also doesn’t cover most service consumption such as travel and lodging.

2｜U.S. layoffs still stay low

For the week ending July 11, initial jobless claims fell by 8,000 to 208k, a ten-week low. This indicates that while the jobs market may not be actively hiring, companies also haven’t carried out large-scale layoffs.

3｜Korea’s central bank hikes rates to 2.75%

The Bank of Korea decided unanimously to raise rates by one step. Reasons cited include growth supported by exports and investment, inflation that could still stay above target, and financial stability risks from Seoul home prices, household debt, and exchange rate volatility.

4｜Asian semiconductor stocks swing sharply

MSCI Asia Pacific ex-Japan index fell 1.7%, South Korea’s KOSPI fell 6.3%, and Japan’s Nikkei index fell 3%. Samsung Electronics fell 8% and SK hynix fell 11%. The single-day decline is influenced by expectations, positioning, and risk sentiment—and can’t be attributed to one piece of news alone.

5｜The U.S. dollar stays near a one-month low

The U.S. dollar index is around 100.50, near its low since June 18. Interest-rate futures show the market estimates the Fed’s probability of a rate hike in July at about 11%, down from 45% earlier this week. But energy prices and geopolitical developments could still shift rate expectations again.

Data cutoff: 2026-07-16 20:55 (Singapore time)