[R&E] AI and ESS Dual-Engine Effect, TSMC Gross Margin Hits Record High... Oil Prices Breaking $94 Fuels 'High Inflation' Concerns

[R&E: Research & Epoch] This is News Epoch's signature report that provides a perspective on a new era of investment through an integrated analysis of global financial data and domestic brokerage research.

Global Market Brief

The New York stock market hit record highs the previous day, with major indices rising despite mixed trading. The S&P 500 (NYSE: SPX) rose 0.26% to 7,041.28 points, while the NASDAQ (NASDAQ: IXIC) gained 0.36% to reach 24,102.7 points. This was influenced by U.S. initial jobless claims coming in at 207,000, below the market expectation of 213,000, thereby reaffirming the robustness of the labor market. This is interpreted as an indicator supporting expectations for a soft landing of the U.S. economy. On the other hand, industrial production in March decreased by 0.5% compared to the previous month, falling short of market expectations (a 0.1% increase). While a slowdown in growth is observed in the manufacturing sector, the robust service sector is offsetting this trend.

The Chinese economy's real GDP growth rate for the first quarter recorded 5.0% year-on-year, exceeding market expectations (4.8%). Notably, the Producer Price Index (PPI) for March turned positive for the first time in 41 months, evidencing an easing of deflation concerns and a recovery in industrial production. However, retail sales and fixed-asset investment in March (each up 1.7% year-on-year) fell below expectations, suggesting that the domestic demand recovery remains sluggish.

Global inflationary pressures appear to be escalating further. West Texas Intermediate (WTI) crude oil rose 3.7% from the previous day to $94.7, and Brent crude prices also approached the $100 mark. This reflects concerns over supply disruptions due to deepening geopolitical instability in the Middle East. The dollar index continued its strength, rising 0.16% to 98.2 points. The International Monetary Fund (IMF) warned that increased defense spending by various countries could exacerbate the opportunity costs for the global economy.

Domestic Market Overview

The domestic stock market surged the previous day, bolstered by the strength of global tech stocks and expectations of China's economic recovery. The KOSPI skyrocketed 2.21% from the previous day to record 6,226.05 points, successfully recapturing the 6,200 level. The KOSDAQ also demonstrated an accompanying upward trend, closing at 1,162.97 points, up 0.91%. This was the result of improved investor sentiment as core tech stocks, such as semiconductors, reflected the positive momentum of the New York stock market. However, the KRW/USD exchange rate rose by KRW 4.7 from the previous day to 1,479.8 won, meaning the burden of high oil prices and the strong dollar on domestic import prices and corporate profitability persists.

Key Industry Issues and Insights

The semiconductor industry has entered an unprecedented boom, driven by an explosion in artificial intelligence (AI) demand. TSMC (NYSE: TSM), the world's largest foundry company, reported first-quarter revenue of $35.9 billion, an increase of 41% year-on-year. In particular, its gross margin hit an all-time high of 66.2%. The decisive factor was a 45% surge in revenue from high-performance computing (HPC) compared to the previous year. TSMC (TSM) plans to revise its 2026 annual revenue guidance upward to 'over 30%' and expand its capital expenditures to a maximum of $56 billion. This is expected to lead to benefits for Korean memory and back-end processing companies within the global semiconductor supply chain. The fact that AMD (NASDAQ: AMD), whose server central processing unit (CPU) business has gained renewed attention, soared 7.80% and rose for 12 consecutive trading days also proves the market's robust demand.

In the secondary battery market, energy storage systems (ESS) have emerged as a new core growth engine. CATL (SZ: 300750), the world's leading battery company, announced that its first-quarter ESS shipments recorded 51GWh, a staggering 110% increase year-on-year. Electric vehicle battery shipments also maintained a solid growth trajectory, rising 52%. First-quarter revenue and net profit recorded an 'earnings surprise,' exceeding market expectations by 11.0% and 15.7%, respectively. CATL (300750) presented an aggressive goal to increase 2026 ESS shipments by over 70% year-on-year. As lithium iron phosphate (LFP) batteries account for 93% of global ESS installations, it is time to pay attention to the moves of domestic companies that have secured relevant technological capabilities.

In the energy and heavy industry sectors, a robust earnings trend for industrials is highly likely despite inflationary pressures. This is because both improved profitability due to the high oil price trend and benefits from expanded infrastructure investments are expected simultaneously. Hyosung Heavy Industries is analyzed to see a first-quarter revenue of KRW 1.3 trillion and an operating profit of KRW 126.6 billion, increasing by 22.6% and 9.6% year-on-year, respectively. The expanding global demand for power infrastructure is driving the earnings improvement of related domestic companies.

Market Signals

• TSMC's Record High Margin: Achieved a first-quarter gross margin of 66.2%, maximizing profitability with a 7.4 percentage point increase year-on-year.

• CATL's ESS Shipments Double: First-quarter ESS shipments reached 51GWh, increasing 110% year-on-year and securing a new growth engine.

• China's Q1 GDP Beats Expectations: Recorded a real GDP growth rate of 5.0%, signaling an economic recovery.

• WTI Crude Surpasses $94.7: Rose 3.7% from the previous day, aggravating global supply chain tensions and high inflation concerns.

• Robust U.S. Employment Indicators: Initial jobless claims came in at 207,000, falling below market forecasts and suggesting the possibility of an economic soft landing.

Epoch View: Investment Implications

The current market presents a tight tug-of-war between the powerful driving force of technological innovation led by AI and ESS, and inflationary pressures caused by high oil prices and geopolitical instability. The overwhelming performances of TSMC (TSM) and CATL (300750) demonstrate that the structural changes of AI and energy transition are translating into actual, proven profits. In particular, the margin expansion of leading companies possessing technological leadership signifies qualitative growth for the industry.

However, as deepening Middle East risks push oil prices close to $100, the timing for global interest rate cuts is highly likely to be delayed. This is a variable that heightens monetary policy uncertainty. Therefore, while paying attention to the solid fundamentals of growth industries, a cautious approach of closely monitoring macroeconomic variables such as high inflation, a strong dollar, and geopolitical risks is essential. Whether technology-driven growth can offset inflationary pressures and lead to an economic soft landing is expected to be a key watershed determining the market's future direction.

This content was generated by News Epoch's proprietary AI algorithm, which analyzes public data from the research centers of major domestic brokerages and global financial media in real time. It is an objective summary based on collected data and does not constitute an investment solicitation or recommendation for specific stocks.