It May Be Time to Buy the Dip in Texas Instruments

Key Points

• Texas Instruments' stock is under pressure as tariffs weigh on near-term revenue, particularly in the automotive sector.
• The company’s analog and embedded chips are vital for industrial, automotive, and AI-related applications, offering durable long-term demand.
• Technical indicators show TXN may be nearing oversold levels, with support at $180 and potential upside targets at $200 and $210.

Texas Instruments Inc. NASDAQ: TXN is an example of why not all chipmakers are the same in this artificial intelligence (AI) supercycle. NVIDIA Corp. NASDAQ: NVDA headlines the sector due to its explosive AI-driven growth. But Texas Instruments operates in a different lane of the technology sector. However, this could reward investors with the patience to get through the stock’s recent downturn.

In the trailing twelve-month period, NVIDIA has delivered year-over-year (YOY) revenue growth of 71% compared to just 2% for Texas Instruments. There’s a reason for that. NVIDIA is the go-to source for graphics processing units (GPUs) needed for data centers.

By contrast, Texas Instruments focuses on analog and embedded chips that are needed in essential, but more cyclical sectors such as automotive and consumer electronics.

It's not surprising, then, that TXN stock is finding it hard to stay at its all-time high, which it reached earlier this year. That said, Texas Instruments is still a profitable and shareholder-friendly company that looks oversold and could be a buy-the-dip opportunity.

Tariffs Create Near-Term Headwinds

Speaking at the Citi Global TMT Conference, the company’s finance chief, Rafael Lizard, confirmed that the company’s strong 14% YOY revenue growth in its most recent quarter was largely due to manufacturers pulling forward demand in an effort to avoid tariffs.

That puts the focus squarely on the company’s guidance for the upcoming quarter. Texas Instruments guided for revenue between $4.45 billion and $4.80 billion. At the low end, it will match the prior quarter, and the upside is only about 8%.

The automotive sector is the primary culprit for the current quarter. Unfortunately, it’s also a sector that could benefit from a resolution of the tariff concerns, which is not likely to happen before the company’s quarter ends.

No Government Stake in Texas Instruments

If investors have concerns about TXN stock, one concern shouldn’t be that the U.S. government wants to take an Intel-like stake in the company. Lizard told investors that the company hasn’t been approached nor discussed taking an equity stake in the company as a condition of the company’s CHIPS Act incentives.

This is significant because Texas Instruments competes indirectly in the AI space. Specifically, the company’s chips will be required for power management, signal conditioning, and connectivity needed in data centers.

To that end, the company says its data center revenue is growing, but it’s still just a fraction of its revenue compared to its core operations.

Analysts Maintain Bullish Outlook

At around 34x forward earnings, TXN stock is trading at a premium to its historical averages.

However, analysts seem to believe the company can grow at that premium.

As of this writing, TXN stock is trading at around $183 per share, about 15% below the consensus price of $211.90.

Since the company’s last earnings report, analyst sentiment is generally bullish with several analysts offering price targets that are higher than the consensus target, including Rosenblatt Securities which has the highest target of $245.

This suggests that despite the valuation premium, many see meaningful upside potential driven by long-term growth prospects and improving industry dynamics.

Technical Signals Point to a Potential Rebound

Of course, investors want to know the potential upside for TXN stock, but when assessing a buy-the-dip opportunity, it’s good to look for the floor. In this case, TXN is starting to look oversold. Its current price is well below its 50-day simple moving average (SMA).

The stock’s relative strength indicator (RSI, not shown) is around 36, putting it near oversold territory.

Momentum indicators also look favorable. The MACD is still negative, but downside momentum is slowing, which is also consistent with oversold conditions. Plus, the trading volume suggests that panic selling does not drive the stock's pullback.

If support holds at $180, investors could see a near-term recovery with a primary area of resistance around $200 and $210 as the next target.