Most important take away

The semiconductor supply chain — ASML and TSMC — remains a strong “picks and shovels” investment thesis for AI regardless of which chip designer wins. TSMC’s record margins and rising capital expenditures signal the AI infrastructure cycle has further to run, while bank earnings show consumers are holding up well despite market volatility.

Summary

Stocks and investments mentioned:

• Bank of America (BAC): Beat estimates on top and bottom lines. Earnings up 17% YoY, equity trading up 30%, investment banking fees up 21%, net interest income up 9%. Credit quality is improving with net charge-off ratio down 6 basis points to 0.48%. Provision for credit losses was $200M less than expected. Consumer health looks solid.

• Charles Schwab (SCHW): Revenue hit an all-time high, up 16% YoY, though slightly below analyst expectations. Average daily trading volume up 34% (company record). Added 1.3M new brokerage accounts and $140B in net new assets. Total client assets up 19% YoY. Announced a new crypto trading feature. Trades at ~20x earnings, which is expensive relative to other banks. Bought back $2.4B in shares (1.5% of float in one quarter). A calmer market could actually be a negative catalyst by reducing trading volume.

• ASML (ASML): Sold 79 lithography machines generating just over $10B in revenue, slightly beating expectations. Demand is strong with robust orders, especially from memory companies upgrading for AI compatibility. Margins are within normal range. Installed base management (service) revenue growing 17%, outpacing system sales growth — a positive sign of customer engagement.

• Taiwan Semiconductor / TSMC (TSM): Beat expectations with 35% revenue growth in local currency. Record gross margin of 66%, operating margin of 58%, and net profit margin of 51%. High-performance computing (AI) is the primary growth driver. Capital expenditures jumped 10% YoY, signaling management believes the cycle has more room to run despite already-high margins.

• Lyft (LYFT): Trading at just 5x trailing free cash flow, down 40% from 52-week highs. Posting record adoption, revenue, and profits. John Quast believes self-driving cars will be a net positive for rideshare platforms, not a threat, citing emerging partnerships between autonomous vehicle makers and rideshare companies. He sees 15x free cash flow as still reasonable for a double-digit grower.

• PayPal (PYPL): Recently fired its CEO, replaced by HP executive. Despite leadership change, underlying initiatives continue: ad platform ramp-up, ChatGPT wallet integration, Google partnership. Key assets remain Venmo and Braintree. The new CEO’s background in commodity/price-taker businesses (HP) may actually suit the Braintree business well.

• Toast (TOST): Reports in early May. Jason Hall is watching whether it can maintain strong growth after lapping the large Apple deal from Q1 2025 and whether the “SaaS apocalypse” AI disruption narrative affects it. Toast’s deep embedding in restaurant operations creates high switching costs.

Actionable insights:

1. TSMC and ASML as AI picks-and-shovels plays: These companies win regardless of which chip designer dominates. TSMC’s 10% capex increase signals the AI infrastructure cycle is not at its peak yet, making both worth considering for AI exposure without picking individual winners.

2. Bank of America’s consumer health data is a macro signal: Improving credit quality and lower-than-expected loss provisions suggest consumer resilience, which is broadly positive for the economy and risk assets.

3. Lyft at 5x free cash flow could represent deep value: If you believe rideshare platforms will benefit from (rather than be disrupted by) autonomous vehicles, the current valuation looks compelling relative to the company’s growth and record metrics.

4. Schwab’s elevated trading volumes are a double-edged sword: While current results benefit from market volatility, investors should recognize that a calmer market environment would likely reduce trading activity and revenue.

5. PayPal warrants a watch for turnaround signs: With multiple new initiatives potentially hitting revenue numbers soon, upcoming earnings could be a catalyst if growth reaccelerates under new leadership.

Chapter Summaries

Bank of America Earnings

Bank of America delivered a strong quarter beating estimates across nearly all business lines. Earnings grew 17% YoY with particular strength in equity trading (+30%) and investment banking (+21%). Most notably, consumer credit quality is improving, with provisions for losses coming in $200M below expectations and the net charge-off ratio declining to 0.48%.

Charles Schwab Earnings

Schwab posted record revenue and record daily trading volumes driven by market volatility. The company added 1.3M new accounts and $140B in net new assets. However, revenue slightly missed analyst expectations, pressuring the stock. At 20x earnings, Schwab is expensive relative to bank peers. The company is aggressively buying back shares, signaling it views its own stock as cheap.

ASML and TSMC: The AI Semiconductor Supply Chain

The hosts explained how the AI chip supply chain works: Nvidia designs chips, TSMC manufactures them, and ASML makes the lithography machines TSMC uses. ASML sold 79 machines for $10B+ in revenue with strong order demand. TSMC posted 35% revenue growth with record margins across the board. TSMC’s 10% capex increase signals confidence that the AI investment cycle has further to run, even if the semiconductor industry is inherently cyclical.

Earnings Season Watch List

The team shared their most-anticipated upcoming earnings reports. John Quast is watching Lyft, which trades at a deep discount (5x FCF) despite record metrics. Matt Frankl is focused on PayPal to see if new initiatives show up in revenue under new leadership. Jason Hall is tracking Toast to assess growth sustainability after lapping a major Apple deal and to gauge whether AI disruption concerns are warranted for embedded SaaS platforms.