Chip Stocks and Bank Earnings Extravaganza

In this episode of Motley Fool Money, Motley Fool contributors Jason Hall, Jon Quast, and Matt Frankel discuss:

• Bank of America and Schwab Q1 results.
• TSMC and ASML's first quarter, and the implications for AI.
• 3 stocks the hosts are most looking forward to seeing report this quarter.

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A full transcript is below.

This podcast was recorded on April 16, 2026.

Jason Hall: Earning season has kicked off, and we have updates from the biggest names in banking and semiconductors to digest. This is Motley Fool Money. Welcome to Motley Fool Money with the Hidden Gems team. I'm Jason Hall, filling in for Tyler Crowe today, and I'm joined by Fool contributors that you guys hear a lot from here, Jon Quast, Matt Frankel.

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Let's get into it here. We've already talked about Goldman Sachs earlier this week. Matt, you're back from a Motley Fool event, and you're one of our bank experts here. You've owned Bank of America longer than any other bank in your portfolio. It's also become the largest bank holding that you have. How was the quarter?

Matt Frankel: They had a pretty excellent quarter. They beat estimates on both the top and bottom lines and pretty much everywhere else throughout their business. Their earnings were up 17% year over year. Net interest income beat expectations, trading revenue, investment banking fees, asset management fees. They were better than expectations, all increased. Equities trading was really strong. Grew 30% year over year. It's not surprising given how volatile the market's been. People trade more when the market's volatile. Investment banking fees grew 21%. We hear about the upcoming wave of IPOs. A lot of them have hired investment banks. That's not too surprising. Net interest income was up by 9%. All the profitability metrics, return on equity, things like that, showed great improvement. The only spot where they missed expectations was fixed income trading, but interest rates were pretty stable and predictable. That's relatively minor, considering that the bank outperformed its expectations virtually everywhere else.

Jason Hall: We saw Goldman Sachs reported the same thing in FICC, so that seems more of an industry trend and not a bank-specific trend.

Matt Frankel: I think it was expected going into it because Bank of America was, I think, the number three or four bank to report. I mean, the best news might be that consumers seem to be holding up well, not even a company-specific thing. The bank's provision for credit losses was about 200 million less than expected. Brian Moynihan, the CEO, he said that credit quality is good and improving. The numbers back that up, the bank's net charge-off ratio, it improved six basis points year over year to 0.48%.

Jon Quast: Now, Matt, Jason, and I were on the show earlier this week, and we were looking at Goldman Sachs. We saw that Goldman Sachs actually increased credit loss reserves. Is this different from that, or can you just explain it for those of us who don't follow the banking industry as closely as you do?

Matt Frankel: Yeah, so the reserves are the total amount they're holding in the tank for anticipating loans to default. The provision is really what they're putting aside this quarter. It is the same essential concept. They're setting money aside, so if consumers default, it's coming out of their pocket. This is a pool of money that's already there. It's something that every bank has, and it's really an indicator of where they see the consumer weakness or strength.

Jason Hall: Matt, we also heard from Schwab, which is a bank, but it's probably better known to most non-Schwab bank customers as a brokerage and investing services provider. Specifically, the brokerage services, how did that business do?

Matt Frankel: Yeah, well, just like I mentioned with Bank of America, trading activity was very elevated, not surprising. The market was down a lot in the first quarter, especially after the Iran conflict started. We saw average trading volume up 34% year over year on a daily basis. That was a new company record. Revenue was also an all-time high for Schwab, up 16% year over year. But it was actually lower than experts thought it would be, and that's why we're seeing the stock under pressure after earnings. But overall, Schwab seems to be doing pretty well. They added 1.3 million new brokerage accounts in the quarter. Schwab is a growing business, $140 billion of net new assets. Their total client assets are up 19% year over year, and that's not all due to stock market performance, I can tell you that. Plus, Schwab announced a new crypto trading feature today that will bring retail investors the ability to trade crypto on its platform.

Jason Hall: Matt, if we go back a few years ago, investors were really worried about Schwab's balance sheet. Interest rates were skyrocketing. Created fears that Schwab's bank was going to follow Silicon Valley Bank and First Republic in failing. But we just saw the stock reach new all-time highs. Late last year, the business in the balance sheet seemed to be on a very solid footing. But if we look at multiples, both on earnings multiple and book value multiples, it's still well below where we've seen it in prior peaks. Do you think there's room for further multiple expansion, or should investors really be focused on earnings growth as the main driver for future returns?

Matt Frankel: On one hand, Schwab seems to think that its own stock is cheap. They spent $2.4 billion on buybacks in the quarter. That's about 1.5% of their shares in one quarter, which is a pretty aggressive pace. But on the other hand, it's not a cheap bank stock. It trades for about 20 times earnings, which is a lot higher than Bank of America, Goldman Sachs, or any of the other ones that have reported in a somewhat uncertain economic environment. It might sound odd, but if the market volatility calms down, let's say, the Iran war ends and things like that, the market just calmly makes new highs, as I would put it, like it was doing at the end of last year. It could actually be a negative catalyst. We'd see lower trading volume and things like that. But the real thing that investors should know going forward is that Schwab's earnings, even more so than other banks, can be lumpy because they really depend on not only interest rates, but trading volume, what the market's doing, and things like that. Investors should keep the lumpiness in mind.

Jason Hall: There's a little bit of a compound or effect here when you're a brokerage and also a bank, which are both very cyclical, lumpy businesses. Matt, thanks for the insight there. After the break, we're going to dig into earnings from two of the biggest names in semiconductors, which right now that also means AI. You're listening to Motley Fool Money. Welcome back to Motley Fool Money with the Hidden Gems team. AI continues to be the driving force behind this stock market broadly. We just got Q1 results from two of the biggest names in chip manufacturing, with ASML reported yesterday, that was the 15th, and Taiwan Semi, TSMC in shorthand, reported this morning. Jon, let's bring you into the conversation here.

Jon Quast: Yeah, and for this conversation, can I just frame it this way? I think we should zoom out for our listeners just to make sure that everyone is up to speed on what's going on behind the scenes. Many of us are using chatbots these days. Jason, I don't know if you have a preference. You got many to choose from there.

Jason Hall: I'm a Gemini guy myself.

Jon Quast: Let's say that you go to Gemini, and you're looking to brainstorm activities for your kids. I know you got a couple of kids, and sometimes we don't know what to do with them. You ask Gemini, " Hey, what are some things that I can do with my kids today? It's a sunny day, whatever." It spits out some ideas for you. That's simple for you. You just put in a couple of inputs. But computationally, that's actually pretty hard, and it's not just any computer that does that. You need something powerful, and that's why NVIDIA's GPUs are really the preference in the industry to make all this happen behind the scenes. There's a data center somewhere that's got a lot of these GPUs in them to make that happen.

Here's the thing, NVIDIA doesn't make its GPUs. It comes up with the designs, yes, but it outsources the manufacturing. One of the companies that is doing the work for NVIDIA is Taiwan Semiconductor. The company decided that this was going to be its thing. It wasn't going to design anything. Taiwan Semi just makes the stuff for its customers that its customers design. What's interesting about Taiwan's semiconductor though, you take that a step further. It doesn't make the machines that make the chips. It needs many other companies manufacturing equipment, including equipment from ASML. This is a company that makes extreme ultraviolet lithography machines, and really, modern computing isn't possible without ASML behind the scenes making it happen. It's machines currently work down to the two nanometers. I don't have nanometers on my tape measure, so let me just put this in perspective for us. Two nanometers. That's how much your fingernail grows in two seconds. That's how small we're talking about here. It's going to go down to 1.4 nanometers within the next few years. This is incredible technology, and it is making everything happen in AI.

Matt Frankel: It's worth clarifying, Jon, I know you mentioned NVIDIA that they don't make their own chips and they rely on these two companies, but it's not just NVIDIA, it's tough to overstate how embedded these companies are in the entire semiconductor industry and how dominant they are, especially ASML, its technology is unmatched. These are the great picks and shovels plays, and they don't care if NVIDIA wins or AMD wins or whoever wins. If there's a winner, they're going to make money. They want the whole, the rising tide will lift their ship.

Jon Quast: Yeah, and I think that's really good for many investors to say, Hey, I'm not going to pick the winner in the front. I know that no matter what, the picks and shovels behind the scenes are going to make some money.

Jason Hall: Yeah, I think the other part of this is so important too, is as much as we focus on the bleeding edge and the leading edge, which are massively important, these are also the workhorse businesses in the industry too. ASML machines that they made 20 years ago, more than 90% of those continue to operate in memory manufacturing facilities and things like that. TSMC makes chips for pretty much every consumer device you can think about. They're so important. Jon, let's go ahead and make the transition here, though, talk about the quarter. How did they do? Let's start with ASML.

Jon Quast: Yeah, so for ASML, it sold 79 lithography machines. That's it. Just 79.

Jason Hall: It doesn't make sense when you think about the numbers that this business generates.

Jon Quast: That's the thing. That translates to just over 10 billion in revenue for the quarter. So 79 machines. This was actually just a little bit more than what investors were expecting on the top line. But I think that investors need to be careful not to read too much into a slight beat or a slight miss any quarter for ASML, because these machines are so expensive. The difference between a beat and a miss on expectations could be a single machine, and that could just be a timing issue. Sometimes it just doesn't ship on time for a variety of reasons. Just need to be careful there. I think the high-level takeaway, though, for ASML's report is that demand is strong. Margins, gross margin, operating margin, very well within the normal range for both of those. ASML isn't necessarily seeing an incredible margin expansion like some other semiconductor companies are, but overall demand is strong.

Matt Frankel: I wanted to kind of follow up on that. You mentioned the machines, which that's the big driver for revenue. But a significant portion of the revenue comes from what it calls installed base management sales. It's a fancy way of saying the professional services ASML provides to support the machines that they sell to their customers, which obviously, you're buying a machine to do the math $10 billion divided by 79 machines. They're going to need some maintenance. How do you see that? It grew 17%, but the system's revenue fell sequentially.

Jon Quast: I think it's important to note that it was sequential. System sales from the fourth quarter down to the first quarter, yes, there was a drop, but up year over year. It's not unusual to see a steep drop off from the fourth quarter to the first quarter. In fact, that's what happened last year, too. The long-term trajectory is still up for the system sales. Of course, that translates to an ever-growing maintenance revenue stream.

Jason Hall: Yeah, if we look at that both on a sequential basis and a quarterly basis, one of the things that stands out to me is that the services-based revenue in both cases is growing faster than system sales, and that indicates that customers are really leveraging ASML machines in their manufacturing operations, particularly as the machines become more advanced. Jon, let's go ahead and shift back over to TSMC. How was the quarter there?

Jon Quast: I think that Taiwan's semiconductor was a bit more exciting than ASML. The company beat expectations. That goes without saying, 35% growth in local currency. But what was so interesting here is that it is in contrast to ASML, it is seeing this margin expansion. Gross margin at 66%, operating margin at 58%, net profit margin at 51%. Those are all record highs, indicating that demand is far beyond Taiwan's semiconductor capabilities. High-performance computing is what is driving the numbers here, so that's AI. It's just an incredibly strong quarter for Taiwan Semiconductor yet again.

Matt Frankel: Yeah, so clearly AI investment has been massive lately, and that's the driving force behind their results, behind NVIDIA's results, behind all these companies. I have a tough time wrapping my head around all these several hundred billion dollar figures that companies are spending on data centers and AI infrastructure. Do you see these growth rates, like the one Taiwan Semi reported as being sustainable? Or are you a little skeptical, too, that there's going to be trillions of dollars in annual spending for years and years to come?

Jon Quast: That is the question, isn't it, Matt? I think that just takes us right into the bottom line from these two reports that we're looking at here, different companies, but interrelated. I think what we can say if we're combining the two things is that there are some leading indicators in these reports that we just looked at when it comes to the AI infrastructure spend that you're just referencing there. So for ASML, what is the leading indicator there, the orders? Right now, orders are very strong, particularly from computing memory companies. Some of them are using some older machines, and now they're trying to update their memory offerings to make them more AI compatible. They're trying their hardest to get their hands on ASML machines. That's a good sign.

Then, when you look at Taiwan Semiconductor, their capital expenditures just jumped 10% from the previous year. This company can't keep up right now. You look at the margins, and that seems to be the record profit margins seem to indicate a cyclical top. We know that the semiconductor industry is cyclical. But then you look at the capital expenditure spending, this company knows the industry very well. It would not be increasing its capex by 10% if it thought that it was right at the cyclical top. It's telling us that it's still investing so that it can meet demand. That is a long-term driver for these businesses. I think these two reports are telling us, yes, the semiconductor industry is cyclical, but this is a cycle unlike anything we've ever seen before, and it can continue to go on for some time now.

Jason Hall: Be on top of the cycle, but certainly later in the cycle than we have been, the big question, of course, is how long is it going to play out? Jon, thanks again for bringing us some insights there. After the break, we're going to talk about the companies that we are most looking forward to hearing from this earnings season, more importantly, why? You're listening to Motley Fool Money.

Welcome back to Motley Fool Money with the Hidden Gems team. A quick note before we dive into the three stocks that we're really interested in hearing from this quarter. We love it when we get to make you our listener part of the conversation. If you have a stock or investing question for Jon, for Matt, me, anyone else you've heard on the show, you can now email us at podcasts@fool.com. We love to have mailbag segments whenever possible, so send your questions. But remember, keep them Foolish. That email again is podcasts@fool.com. That's podcasts with an S on the end @fool.com. Guys, we are just at the start of earning season. This is really the first full, big week. On one hand, it's important to remember this is a 90ish-day snapshot of businesses that we often intend to own for decades. While we should always keep that perspective, it doesn't mean we can't be excited or look forward to hearing from our favorite companies. Jon, I want you to get us started here. What's a company that's set to report that you are most looking forward to hearing from and why?

Jon Quast: Yeah, I'm probably looking forward to Lyft the most here. That is ticker symbol LYFT, and I'm looking forward to it, probably for selfish reasons because this is a large holding of mine. I'm grateful that my position is actually in the money. It's making money right now, but it's down 40% from its 52-week high. Right now, it trades at just five times its trailing free cash flow in investing lingo. That is cheap. Look, everyone says that self-driving taxis are going to be the end of this business. I don't buy that. Right now, in the meantime, Lyft continues to put up record adoption numbers, record revenue, record profits. The company's scheduled to report in about three weeks. I'm really hoping that it just reports blowout numbers. I hope that management repurchased a ton of shares down here at these cheap prices. I hope that that combination finally makes investors give it at least a little bit of credit here. I mean, I would say that 15 times its free cash flow is still an extremely reasonable valuation for something that's growing by double digits and posting record adoption numbers. I mean, trading is just five times free cash flow. I'm just waiting for Lyft to blow it out of the water.

Matt Frankel: I'm of the opinion that self-driving cars are going to be a net positive for companies like LYFT and Uber. They'll allow them to serve their customers more effectively. We're already seeing partnerships formed between the makers of self-driving cars and these rideshare companies. I don't buy it either.

Jason Hall: I don't follow LYFT as closely as I do Uber, but when Dara made the decision to get rid of the self-driving initiative internally and focus on building the platform, that was a big signal to me that management was focused on the right place. I think LYFT's doing the same thing. The value of those platforms is going to be really, really important, just like Matt was saying. Matt, you're up next year.

Matt Frankel: Yeah, the one I'm most looking forward to is PayPal. Hear me out here because I know it's down quite a bit. It's no surprise. Last quarter, they surprisingly fired their CEO, and growth has been unimpressive recently. But there are a lot of initiatives going on behind the scenes. The only thing that really changed is the person at the top. Everything else PayPal was doing, they're still doing. I want to see if some of these are going to start being reflected in the numbers. They recently started ramping up their ad platform in mid-2025. For example, they became the first payment wallet integrated into ChatGPT. They have a new partnership with Google. I can name a dozen things. But I want to see if some of these are going to start showing up in the revenue numbers.

Jon Quast: Yeah, I mean, the one thing that PayPal still has going for it, even though there is uncertainty with the CEO, I'm not a huge fan of them doing that making the change there, but it does still have some incredible assets, one of which would be Venmo, still extremely popular. The other would be Braintree, what powers a lot of checkouts behind the scenes without the PayPal logo on it. I think those are some pretty good assets, and PayPal still has that going.

Jason Hall: Said this to Motley Fool members before on the Member Livestream, but I'll say it here for folks that just listen to the podcast. As much as I didn't love the way it went down with the prior CEO, who I thought was doing an okay job, getting replaced by the chairman of the board basically overnight. I can't help but think having somebody that comes from a price taker commodity cyclical business of personal computers at HP, maybe that makes sense as the person that's overseeing that Braintree business. It's a price-taker business, and it's so important to be efficient with unit economics. I've come around that maybe this is the right CEO. I own a little bit, and I'm giving him time to prove out the strategy that they're bringing, as well.

Guys, I'm going to play here too. I've got a stock I'm really following closely, and this is a relatively new addition of my portfolio, but a company I have a lot of high hopes for, and that's Toast. Ticker TOST reports in early May. There's a couple reasons I'm looking forward to hear its results and also really hearing from management. To start, guys, we know about SaaS Apocalypse. So many companies, the idea that AI Power coding is going to drive big disruption for software as a service business, the second we're lapping the Applebees deal. It did that last oir quarter at the beginning of 2025. It was the biggest deal in the company's history, and it drove a ton of growth last year. Now, the company doesn't give written revenue guidance that offers adjusted EBITDA and gross profit, but both are expected, if you look at the company's guidance to grow at a little bit lower rate this year, that makes sense. But what I want to see is if the narrative continues to support strong growth or if the goalposts are moving at all here. Maybe most importantly, whether any of that supports the AI disruption narrative or not.

Jon Quast: I absolutely love this business, Jason. I wish that we could stop talking about it so that I could actually add it to my own portfolio. It's probably in the top five on my watch list, has been for a while. Really great business for the reasons you point out.

Matt Frankel: Yeah, I had a stint in the restaurant business a long time ago, and I can tell you just how embedded their platform is and the switching costs and how many vendors restaurants used to have, and now they can just have Toast that replaces like 20 different things. I do love this business, and I think I don't think it's going anywhere.

Jason Hall: Fools, as always, people on the program may have interests in the stocks they talk about, and the Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. Thanks to our producer, Dan Boyd, and the rest of The Motley Fool team. For Jon, Matt, myself, thanks for listening. We'll chat again soon.

Charles Schwab is an advertising partner of Motley Fool Money. Bank of America is an advertising partner of Motley Fool Money. Jason Hall has positions in ASML, Nvidia, Taiwan Semiconductor Manufacturing, and Toast and has the following options: long January 2027 $25 calls on Toast and short January 2027 $25 puts on Toast. Jon Quast has positions in Lyft. Matt Frankel, CFP has positions in Bank of America. The Motley Fool has positions in and recommends ASML, Advanced Micro Devices, Alphabet, Goldman Sachs Group, Lyft, Nvidia, Taiwan Semiconductor Manufacturing, Toast, and Uber Technologies. The Motley Fool recommends Charles Schwab and Helmerich & Payne and recommends the following options: short June 2026 $97.50 calls on Charles Schwab. The Motley Fool has a disclosure policy.