Taiwan Semiconductor Manufacturing Company told investors on Thursday that it grew second-quarter profit 77% from a year ago and would lift its 2026 capital spending to between $60 billion and $64 billion, up from a prior range of $52 billion to $56 billion. The chipmaker beat Wall Street’s estimates. Its stock fell anyway — and dragged the entire semiconductor sector down with it for a second straight session.

The message traders took from the company’s own numbers was not about demand. It was about cost. TSMC is spending roughly $8 billion more this year than it told the market three months ago, and it warned customers to expect higher prices. For a group of stocks that has led the 2026 rally on the promise that AI spending pays for itself, that was enough to trigger selling across the board.

The backdrop did not help. U.S. Central Command confirmed a fifth consecutive night of strikes on Iran, and Washington has reinstated its naval blockade of Iranian ports near the Strait of Hormuz. Crude held near recent highs, Treasury yields moved up, and the Commerce Department reported June retail sales rose just 0.2%, in line with forecasts but weighed down by a 5.3% drop at gasoline stations. The Labor Department said initial jobless claims fell to 208,000 for the week ended July 11, below the 218,000 economists expected. The Philadelphia Federal Reserve’s manufacturing index jumped to 41.4 for July.

Where the indexes finished

Heading into the closing bell, the S&P 500 was down 59.13 points, or 0.78%, at 7,513.27. The Nasdaq Composite fell 454.66 points, or 1.73%, to 25,814.56 — the worst of the three by a wide margin. The Dow Jones Industrial Average gave back an early triple-digit gain to close down 253.08 points, or 0.48%, at 52,405.56. The Russell 2000 slipped 0.30% to 2,967.22.

The headline numbers hide what actually happened. Most S&P 500 members finished higher. The Invesco S&P 500 Equal Weight ETF was up roughly 0.6% on the day, and the NYSE Composite climbed 0.44%. Money did not leave the market — it left chips.

Market movers

The Philadelphia SE Semiconductor Index fell 3.8%. TSMC’s U.S.-listed shares dropped about 2% to $411.20 despite the record quarter. Memory names took the worst of it: SanDisk was the biggest decliner on the Nasdaq 100, off roughly 9%. Western Digital and Seagate Technology each fell about 7%. Micron Technology dropped 5.2% to $857.10. Arm Holdings, Marvell, Qualcomm, Intel, Broadcom, and Nvidia all traded lower.

On the other side, UnitedHealth Group beat second-quarter estimates and raised its 2026 profit forecast, sending shares up 4.6% to $437.61 and single-handedly keeping the Dow from a much worse day. Humana and Centene rose 4.4% and 3.5%. Coca-Cola and Home Depot each added better than 2%.

GE Aerospace was the day’s oddity — the jet-engine maker lifted its 2026 profit forecast and still fell 4% to $345.94. Corning lost 6.7%, ServiceNow fell 4.7%, and United Airlines dropped 2.8% as management pointed to higher fuel costs in its third-quarter outlook. IBM, Goldman Sachs, and Cisco Systems were the heaviest Dow decliners.

Analyst calls

JPMorgan upgraded BlackRock to Overweight from Neutral and raised its price target to $1,364 from $1,165. Capital One upgraded Palo Alto Networks to Overweight from Equal Weight with a $421 target, up from $307, and lifted Okta to Overweight with a $171 target, up from $126. Morgan Stanley upgraded Rocket Companies to Overweight with a $19 target. BofA raised Cintas to Buy with a $230 target. Goldman Sachs cut American Electric Power to Neutral with a $147 target.

Jay Goldberg, senior analyst at Seaport, questioned the economics behind Nvidia CEO Jensen Huang’s forecast that computing costs will climb toward $100 billion per gigawatt, calling it a contradiction in the company’s own business model.

Commodities and volatility

West Texas Intermediate traded just below $80 a barrel after settling at $79.60 Wednesday. Brent held under $85, following a 12% run over the previous three sessions. Gold fell 1.74% to $3,981.20. The CBOE Volatility Index rose 8.48% to 17.00. Traders are pricing in an 88% chance the Federal Reserve holds rates steady at this month’s meeting, according to CME’s FedWatch tool.

What comes next

Netflix reports second-quarter results after the bell. Wall Street expects $0.79 per share on revenue of $12.58 billion. The stock is down roughly 20% this year, and options traders are positioned for a move of nearly 9% in either direction.

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