Key Stats for Texas Instruments Stock
- Pre-market Price Change for TXN stock: -3%
- $TXN Share Price as of Dec. 12: $179.42
- 52-Week High: $221.69
- $TXN Stock Price Target: $189
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What Happened?
Texas Instruments (TXN) stock is down over 3% in pre-market after Goldman Sachs delivered a rare double downgrade, moving the chipmaker from “Buy” to “Sell”.
The firm slashed its price target from $200 to $156, implying roughly 16% downside from current levels. This marks one of the most aggressive downgrades in the semiconductor sector as Goldman adjusts its 2026 outlook.
The move wasn’t about the broader chip market, which Goldman views positively. Analyst James Schneider expects AI spending among hyperscalers to continue climbing, driving tailwinds for digital chips, memory, and storage in 2026.
He also anticipates a gradual recovery in industrial and automotive markets, which would typically benefit analog chipmakers such as Texas Instruments.
Schneider pointed to what he called “lackluster” execution through this cycle and said TXN stock will have less leverage than peers when the upcycle arrives.
The analyst specifically called out strategic capacity and capital allocation choices that will serve as “an idiosyncratic drag” weighing on margins and earnings recovery relative to competitors.
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What the Market Is Telling Us About TXN Stock
The downgrade highlights concerns that have been building around Texas Instruments’ aggressive capacity expansion strategy.
The company has been in the middle of a six-year, multi-billion-dollar investment cycle running from 2021 to 2026, building out manufacturing facilities in Sherman, Texas, and Lehi, Utah.
While management argues that this positions them never to repeat the supply shortages of 2021-2022, the timing couldn’t have been worse.
TXN stock now sits with what Goldman describes as “record levels” of inventory, just as the recovery is proving slower and more gradual than expected.
At a recent UBS conference, CEO Haviv Ilan acknowledged that the company had finally reached its target inventory levels by the end of Q3, which sounds positive until you realize it means they’ve been building inventory amid tepid demand.
Texas Instruments is guiding to a gross margin of 55% in Q4, down about 250 basis points sequentially. CapEx this year will hit $5 billion, and while it’s expected to drop to $2 billion to $3 billion next year as the major build-outs complete, the damage to cash flow has already been done.
The company spent years returning over 100% of free cash flow to shareholders through buybacks and dividends.
Goldman’s concern is that even as CapEx declines and free cash flow theoretically rebounds, TXN stock won’t see the same margin expansion that peers will enjoy during the recovery.
The company’s decision to build massive internal capacity means it’s stuck with fixed costs and depreciation, which will weigh on profitability, especially if the recovery continues at this moderate pace.
Ilan tried to stay optimistic during the UBS conference, noting that 2025 revenue is showing roughly 13% growth at the midpoint, after essentially zero growth in Q4 2024.
He pointed out that all major end markets are recovering, with automotive back to 2022-2023 levels and data center becoming an increasingly important growth driver.
The company plans to break out the data center as a separate segment starting in fiscal 2026, with current annual revenue around $1.2 billion, growing at well over 50%.
After strong momentum in Q1 and Q2 (which may have been artificially boosted by tariff-related pre-buying), Q3 took a step back.
- Industrial is recovering but still hasn’t established a new revenue peak.
- Automotive is growing in single digits, but from a lower base.
- The data center strength is real, but it’s still only a mid-single-digit percentage of total revenue.
Texas Instruments’ share of the analog market peaked at nearly 20% and dropped roughly 400 basis points at the trough.
Goldman’s downgrade also reflects concerns about free cash flow targets. Ilan suggested there’s a scenario in which 2026 could be a record-free-cash-flow year if revenue hits certain levels, with the company’s target range of $8 billion to $12 billion potentially in play.
But that requires revenue growth that may not materialize, and missing those targets “will likely weigh on the shares in the medium term,” according to Goldman.
China accounts for about 20% of TXN’s stock business and is growing in the low-30s year to date. Ilan argued that the company can supply Chinese customers from non-U.S. facilities if needed, citing manufacturing in China, Europe, and Japan.
But the geopolitical tensions add another layer of uncertainty, even if Texas Instruments has navigated them reasonably well so far.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
