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Buy TI and NVIDIA for Exposure to Semiconductor Boom
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Companies in the Semiconductor – General industry are at the forefront of the ongoing technological revolution based on HPC, AI, electrified and automated driving, IoT and other technologies. The semiconductors they produce enable the cloud to function and help analyze data into actionable insights that can be used by companies to operate more efficiently. AI and data-center infrastructure are currently the industry's biggest growth drivers, while automotive and industrial applications provide important additional opportunities. Therefore, the long-term outlook can only be considered bright.
In the immediate future, however, there could be some challenges. While geopolitical instability and the arms race among nations may sound like positive drivers for some, actual wars disrupt supply chains, delay deliveries and drive up prices. U.S. tariffs could exacerbate inflation in end products using semiconductors and potentially disrupt trade, resulting in more of the same challenges. Supply-chain adjustments, export restrictions and elevated memory prices could also create near-term pressures.
NVIDIA Corporation (NVDA - Free Report) is at the center of the AI infrastructure buildout, with its GPUs, networking products and accelerated-computing platforms benefiting from rapidly expanding AI workloads. Texas Instruments (TXN - Free Report) offers exposure to the broader semiconductor cycle through its analog and embedded-processing products, with industrial, automotive and data-center demand providing important growth opportunities. TXN also benefits from long product lifecycles, sticky customer relationships and its ongoing capacity investment cycle. Our bets are therefore on these two stocks.
WSTS expects global semiconductor sales to grow 89.9% in 2026 to $1.51 trillion, highlighting the extraordinary strength of the current cycle. The increase is being driven primarily by memory and AI infrastructure, but strong growth in logic, microprocessors and analog also points to broader semiconductor demand. The regional outlook is similarly strong, with the Americas expected to lead growth in 2026. The broad-based expansion is also supportive of semiconductor demand across the industry's major end markets, including AI and data centers, automotive and industrial applications.
IDC also expects exceptional growth in 2026, with semiconductor revenue rising 52.8%, driven overwhelmingly by AI infrastructure investment. Memory, particularly DRAM and HBM, is the primary driver. IDC estimates that by 2030, data-center semiconductors will account for nearly half of the total semiconductor market, highlighting the scale and longevity of AI infrastructure demand. At the same time, IDC notes margin pressure, supply-allocation challenges and macroeconomic headwinds in several non-memory end markets.
Gartner expects semiconductor revenue to grow 92% in 2026 to $1.56 trillion. Memory is again the biggest contributor, with DRAM and NAND benefiting from severe supply tightness and price increases. The AI-driven diversion of memory capacity, along with sharply higher memory prices, is creating supply constraints and component mismatches in non-AI markets.
Gartner expects memory supply to remain tight in 2027 as AI infrastructure continues to increase memory consumption, potentially limiting the pace of growth in automotive, industrial and other non-AI applications. The underlying strength of automotive and industrial semiconductor demand remains, however, as it is driven by several secular trends, including electrification, vehicle automation, factory automation, robotics, machine vision and rising semiconductor content.
The U.S. government’s target of reducing dependence on China, and onshoring projects with national security implications are also shaping the progress of this industry.
About the Industry
The companies grouped under the Semiconductor – General industry develop and supply a broad range of integrated and discrete semiconductor products, including microprocessors, graphics processors, embedded processors, chipsets, connectivity solutions, digital light processing (DLP) products and analog semiconductors. These products serve diverse end markets, including data centers, automotive, industrial, consumer electronics and communications. The industry includes companies such as NVIDIA, Texas Instruments, Intel (INTC) and STMicroelectronics (STM).
Major Themes Shaping the Industry
Artificial intelligence is the single biggest driver of the semiconductor industry, given the transformation it is bringing in efficiency, cost-effectiveness, automation, safety, environmental benefits and other areas. AI has become an imperative for effective competition across industries, creating enormous demand for the infrastructure needed to develop and deploy AI. This infrastructure requires thousands of semiconductors across GPUs, CPUs, networking, memory, power management and other components. Technology companies are building their own AI capabilities where possible and buying from specialized providers where it makes sense. Moreover, as AI adoption expands, its infrastructure requirements increase further. In this backdrop, data-intensive applications, advances in machine learning and growing AI adoption across data centers, automotive, industrial automation, healthcare, financial services and other markets are major drivers. The resulting semiconductor demand is likely to remain strong for years to come.
There is significant opportunity in the automotive and industrial markets. In fact, these two end markets are shaping up to be its strongest growth drivers after AI. The automotive opportunity is driven largely by electrification (which consumes a large number of chips in things like power management, battery management systems, power conversion systems, charging infrastructure and motor control electronics). Strong growth is also coming from vehicle automation, including autonomous driving and increasingly sophisticated automotive computing. The industrial opportunity is mainly in factory automation, where robots, machine vision systems, production lines and real time monitoring systems are consuming a growing number of embedded processors, analog chips, connectivity chips, sensors and power semiconductors.
Current geopolitics has mixed implications for growth. Geopolitical tensions are adding a dimension to semiconductor demand, as countries increasingly adopt the latest technology in defense, infrastructure and other critical applications. As defense spending accelerates the world over, particularly on fighter planes and unmanned aerial vehicles currently being used in military operations, demand for sophisticated underlying electronics is likely to increase. Tachnavio estimates that semiconductors used in the military and aerospace market will grow at a 6% CAGR through 2029. However, war is not conducive to trade overall because of the disruptions in trade routes, uncertainty in demand and price escalation in key commodities. There may also be export restrictions on products being sold to an enemy country. Therefore, ongoing tensions around the world could dampen demand, raise prices or cause other disruptions in the larger computing, consumer, data center, auto and industrial markets. U.S.-China tensions remain elevated, while there is considerable concern that many of the world's most important leading-edge chips are currently made in Taiwan, considering the heightened cross-strait tensions. Since this has national security implications, there is an ongoing drive to onshore or nearshore manufacturing. The CHIPS Act is facilitating the process.
Macro concerns remain significant. Elevated inflation, tariffs and geopolitical tensions are adding to costs and weighing on consumer confidence. U.S. consumer spending has also moderated, while industrial and other cyclical semiconductor markets remain sensitive to any broader economic slowdown. These factors could temper demand for semiconductors used in consumer electronics, automotive and industrial applications, although AI and data-center demand remains a strong industry growth driver.
Semiconductor supply chains are adjusting. Efficient semiconductor supply chains based on the just-in-time model are no longer prioritized, as the cost advantages they enable are increasingly balanced against the need for resilience in times of huge demand and unforeseen disruptions. Players continue to adjust for external disruptions, such as COVID, wars and tariffs. This, along with other factors, such as the U.S.-imposed restraints on dealing with China, has led semiconductor companies to diversify their supply chains and in some cases, reduce their dependence on the country. This is an ongoing process that will take several years. Some companies are also building inventory so disruptions from geopolitical and other issues may be limited.
Zacks Industry Rank Indicates Strong Prospects
The Zacks Semiconductor-General Industry is a stock group within the broader Zacks Computer and Technology Sector. It carries a Zacks Industry Rank of #23, which places it in the top 9% of nearly 250 Zacks-classified industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates that near-term prospects are improving. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of 2 to 1.
An industry’s positioning in the top 50% of Zacks-ranked industries is normally because the earnings outlook for the constituent companies in aggregate is relatively strong. The opposite is true for stocks in the bottom 50% of industries. In this case, the aggregate earnings estimate for 2026 has increased steadily over the past year and is up 51.4% from the year-ago level while the aggregate earnings estimate for 2027 is up 108.8%.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Stock Market Performance Remains Strong
Tracking the performance of the Zacks Semiconductor – General Industry over the past year shows that the industry has traded at a premium to both the broader Zacks Computer and Technology Sector and the S&P 500 index through most of 2026 and more consistently so since March 2026.
The industry has gained 30% over the past year. The broader technology sector gained 23% while the S&P 500 index gained 17%.
One-Year Price Performance
Image Source: Zacks Investment Research
Current Valuation: Attractive
On the basis of forward 12-month price-to-earnings (P/E) ratio, we see that the industry is currently trading at a 18.32X multiple, which is its lowest point over the past year. It is also trading at a 7.7% discount to the S&P 500’s 19.84X and an 11% discount to the broader sector’s 20.59X. The industry has traded between a low of 18.32X, a high of 37.34X and a median level of 25.04X over the past year. The industry looks somewhat undervalued at these levels.
Forward 12 Month Price-to-Earnings (P/E) Ratio
Image Source: Zacks Investment Research
2 Stocks to Consider
Macro and geopolitics notwithstanding, the industry stands to benefit from stable or declining interest rates, which can improve the attractiveness of risky assets and support investment. Several of the technology heavyweights in this industry are the core suppliers to the AI mega cycle we are seeing now, so we remain optimistic over the long run. Considering the attractive valuation, we think this is a good time to get into play. We are picking NVIDIA Corporation and Texas Instruments:
NVIDIA Corporation (NVDA - Free Report) : Headquartered in Santa Clara, California, NVIDIA is a key provider of computing infrastructure, including GPUs, AI accelerators and networking technologies for artificial intelligence and accelerated computing in data centers, as well as gaming, professional visualization and automotive applications.
The industry backdrop remains highly favorable for NVIDIA as demand for AI-processing semiconductors continues to expand rapidly. Gartner expects revenue from AI-processing semiconductors to grow at a 26.8% compound annual growth rate (CAGR) through 2030, driven by continued spending on AI infrastructure and expanding workloads. This provides NVIDIA with a large and growing addressable market for its GPUs and accelerated-computing platforms, extending the company's current growth trajectory.
NVIDIA's second-quarter fiscal 2027 revenue surged 106% year over year and 18% sequentially, while Data Center revenue jumped 117% year over year and 18% sequentially to $89 billion. Management said AI demand is accelerating, with the buildout expanding beyond the major hyperscalers to multiple frontier AI labs, startups, the open-model ecosystem, enterprises, sovereign AI initiatives and physical AI. Its expanded AWS partnership, which calls for 2 million additional NVIDIA GPUs to be deployed in 2027-28, further underscores the scale and longevity of AI infrastructure investment.
NVIDIA is expanding its ability to meet surging AI demand by securing additional wafer, advanced packaging and high-bandwidth memory capacity through key manufacturing partners. It works closely with TSMC and other foundries to increase production of its latest GPUs and CPUs, while partnerships with memory suppliers such as SK hynix support HBM availability. It has more than 150 supply chain ecosystem partners in Taiwan.
NVIDIA is also securing key components well ahead of anticipated demand, helping support the ramp of its Blackwell and Rubin platforms. Wistron is an important partner expanding U.S. production. Management has said that more than 350 factories across 30 countries are ramping NVIDIA’s Vera Rubin platform. This broad manufacturing network and long-term component commitments enable NVIDIA to scale Blackwell and Rubin systems as demand continues to exceed available supply.
On the downside, rising memory prices are expected to weigh on NVIDIA's profitability, with gross margin projected to decline from 75% in the second quarter of fiscal 2027 to 71%-72% in the fourth quarter before recovering to 72%-73% in fiscal 2028 as price increases take effect. Supply constraints across wafers, advanced packaging, HBM and other components remain a near-term constraint on NVIDIA’s ability to fully meet strong customer demand. Competition from AMD and other chipmakers, along with hyperscalers developing custom AI accelerators, could pressure NVIDIA’s share of AI workloads, although the company is also positioning itself in the custom silicon market through its partnership with MediaTek.
In the last 30 days, the Zacks Consensus Estimate for 2027 (ending January) increased by 33 cents (3.7%) while the estimate for 2028 increased $2.76 (22%). Analysts currently expect revenue and earnings to grow a respective 88% and 93.5% this year followed by a respective 65.5% and 66% in the next.
In the past year, this Zacks Rank #1 (Strong Buy) stock gained 18.7%.
Price & Consensus: NVDA
Image Source: Zacks Investment Research
Texas Instruments, Inc. (TXN - Free Report) : Dallas, Texas-based Texas Instruments is an original equipment manufacturer of analog and embedded processing chips for industrial, automotive, communications, consumer, data center and other applications.
While the US is its largest market, followed by Europe, it’s worth noting that China still accounts for roughly a fifth of its revenues, which could be at increasing risk given the current geopolitics.
As the pandemic and geopolitics impacted the chip supply chain, and the government incentivized American companies to reshore manufacturing, TI changed its manufacturing strategy from one that opportunistically used external capacity to one on the path to source more than 95% of its wafers internally, with more than 80% on 300mm, by 2030.
To this end, it expanded its internal manufacturing capacity in 2024, with tool installations completed and production currently ramping at two 300mm wafer fabs in Richardson, Texas, one in Sherman, Texas, and one in Lehi, Utah. Another Sherman fab and a second Lehi fab are under construction.
The company is a beneficiary of an investment tax credit of up to 35% related to some of its investments in U.S. semiconductor manufacturing (expected to continue on qualified investments up to 2034). It also has an agreement with the Department of Commerce to receive direct funding of up to $1.6 billion for the two large-scale 300mm wafer fabs in Sherman, Texas, as well as the under-construction Lehi fab in Utah.
As of the end of the second quarter, TI had received $630 million of the CHIPS Act funding. The company agreed to spend more than $18 billion in U.S. manufacturing, particularly on 300mm wafer capacity by the end of 2029. With its major capacity expansion nearing completion, TI expects 2026 capital expenditures of $2-3 billion, below the elevated spending levels of recent years.
As may be expected, capacity expansion initially has a negative impact on margins, as capacity can only be filled over time. Therefore, underutilization can weigh on margins during the ramp period. If there are in addition any end market issues, such as supply chain glitches in the automotive market or cyclicality in the industrial market, the impact is compounded.
It is encouraging to note that TI has also gradually increased the share of direct sales to customers, which improves insight into their projects and timelines, thus driving sales, customer penetration and market share gains. Customer relationships also tend to be sticky because TI primarily supplies analog and embedded products, which often have long product lives and remain designed into applications for years.
In 2025, more than 80% of business came from direct customers. Since TI has a huge portfolio of thousands of products and builds capacity years in advance to ensure stable supplies even when there is uncertainty in the market, it is we positioned to attract and retain customers, grow its share of content in each design and gradually capture a growing share of the fragmented automotive and industrial markets.
Industrial and automotive each accounted for around 33% of revenue in 2025, underscoring the importance of these markets and the opportunity from growing electronic content. Data center accounted for around 9%. Strength is currently broad-based, with second-quarter growth led by industrial, data center and automotive: industrial revenue increased around 30% year over year, automotive grew in the mid-teens and data center revenue doubled.
In the last 60 days, the Zacks Consensus Estimate for 2026 increased by 79 cents (10.3%) while the estimate for 2027 increased 99 cents (11.1%). Analysts currently expect revenue and earnings to grow a respective 22.7% and 55.1% in 2026 followed by a respective 12% and 16.8% in 2027.
In the past year, this Zacks Rank #2 (Buy) stock gained 47.8%.
View the Zacks #1 Rank List
Image: Bigstock
Buy TI and NVIDIA for Exposure to Semiconductor Boom
Companies in the Semiconductor – General industry are at the forefront of the ongoing technological revolution based on HPC, AI, electrified and automated driving, IoT and other technologies. The semiconductors they produce enable the cloud to function and help analyze data into actionable insights that can be used by companies to operate more efficiently. AI and data-center infrastructure are currently the industry's biggest growth drivers, while automotive and industrial applications provide important additional opportunities. Therefore, the long-term outlook can only be considered bright.
In the immediate future, however, there could be some challenges. While geopolitical instability and the arms race among nations may sound like positive drivers for some, actual wars disrupt supply chains, delay deliveries and drive up prices. U.S. tariffs could exacerbate inflation in end products using semiconductors and potentially disrupt trade, resulting in more of the same challenges. Supply-chain adjustments, export restrictions and elevated memory prices could also create near-term pressures.
NVIDIA Corporation (NVDA - Free Report) is at the center of the AI infrastructure buildout, with its GPUs, networking products and accelerated-computing platforms benefiting from rapidly expanding AI workloads. Texas Instruments (TXN - Free Report) offers exposure to the broader semiconductor cycle through its analog and embedded-processing products, with industrial, automotive and data-center demand providing important growth opportunities. TXN also benefits from long product lifecycles, sticky customer relationships and its ongoing capacity investment cycle. Our bets are therefore on these two stocks.
WSTS expects global semiconductor sales to grow 89.9% in 2026 to $1.51 trillion, highlighting the extraordinary strength of the current cycle. The increase is being driven primarily by memory and AI infrastructure, but strong growth in logic, microprocessors and analog also points to broader semiconductor demand. The regional outlook is similarly strong, with the Americas expected to lead growth in 2026. The broad-based expansion is also supportive of semiconductor demand across the industry's major end markets, including AI and data centers, automotive and industrial applications.
IDC also expects exceptional growth in 2026, with semiconductor revenue rising 52.8%, driven overwhelmingly by AI infrastructure investment. Memory, particularly DRAM and HBM, is the primary driver. IDC estimates that by 2030, data-center semiconductors will account for nearly half of the total semiconductor market, highlighting the scale and longevity of AI infrastructure demand. At the same time, IDC notes margin pressure, supply-allocation challenges and macroeconomic headwinds in several non-memory end markets.
Gartner expects semiconductor revenue to grow 92% in 2026 to $1.56 trillion. Memory is again the biggest contributor, with DRAM and NAND benefiting from severe supply tightness and price increases. The AI-driven diversion of memory capacity, along with sharply higher memory prices, is creating supply constraints and component mismatches in non-AI markets.
Gartner expects memory supply to remain tight in 2027 as AI infrastructure continues to increase memory consumption, potentially limiting the pace of growth in automotive, industrial and other non-AI applications. The underlying strength of automotive and industrial semiconductor demand remains, however, as it is driven by several secular trends, including electrification, vehicle automation, factory automation, robotics, machine vision and rising semiconductor content.
The U.S. government’s target of reducing dependence on China, and onshoring projects with national security implications are also shaping the progress of this industry.
About the Industry
The companies grouped under the Semiconductor – General industry develop and supply a broad range of integrated and discrete semiconductor products, including microprocessors, graphics processors, embedded processors, chipsets, connectivity solutions, digital light processing (DLP) products and analog semiconductors. These products serve diverse end markets, including data centers, automotive, industrial, consumer electronics and communications. The industry includes companies such as NVIDIA, Texas Instruments, Intel (INTC) and STMicroelectronics (STM).
Major Themes Shaping the Industry
Zacks Industry Rank Indicates Strong Prospects
The Zacks Semiconductor-General Industry is a stock group within the broader Zacks Computer and Technology Sector. It carries a Zacks Industry Rank of #23, which places it in the top 9% of nearly 250 Zacks-classified industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates that near-term prospects are improving. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of 2 to 1.
An industry’s positioning in the top 50% of Zacks-ranked industries is normally because the earnings outlook for the constituent companies in aggregate is relatively strong. The opposite is true for stocks in the bottom 50% of industries. In this case, the aggregate earnings estimate for 2026 has increased steadily over the past year and is up 51.4% from the year-ago level while the aggregate earnings estimate for 2027 is up 108.8%.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Stock Market Performance Remains Strong
Tracking the performance of the Zacks Semiconductor – General Industry over the past year shows that the industry has traded at a premium to both the broader Zacks Computer and Technology Sector and the S&P 500 index through most of 2026 and more consistently so since March 2026.
The industry has gained 30% over the past year. The broader technology sector gained 23% while the S&P 500 index gained 17%.
One-Year Price Performance
Image Source: Zacks Investment Research
Current Valuation: Attractive
On the basis of forward 12-month price-to-earnings (P/E) ratio, we see that the industry is currently trading at a 18.32X multiple, which is its lowest point over the past year. It is also trading at a 7.7% discount to the S&P 500’s 19.84X and an 11% discount to the broader sector’s 20.59X. The industry has traded between a low of 18.32X, a high of 37.34X and a median level of 25.04X over the past year. The industry looks somewhat undervalued at these levels.
Forward 12 Month Price-to-Earnings (P/E) Ratio
Image Source: Zacks Investment Research
2 Stocks to Consider
Macro and geopolitics notwithstanding, the industry stands to benefit from stable or declining interest rates, which can improve the attractiveness of risky assets and support investment. Several of the technology heavyweights in this industry are the core suppliers to the AI mega cycle we are seeing now, so we remain optimistic over the long run. Considering the attractive valuation, we think this is a good time to get into play. We are picking NVIDIA Corporation and Texas Instruments:
NVIDIA Corporation (NVDA - Free Report) : Headquartered in Santa Clara, California, NVIDIA is a key provider of computing infrastructure, including GPUs, AI accelerators and networking technologies for artificial intelligence and accelerated computing in data centers, as well as gaming, professional visualization and automotive applications.
The industry backdrop remains highly favorable for NVIDIA as demand for AI-processing semiconductors continues to expand rapidly. Gartner expects revenue from AI-processing semiconductors to grow at a 26.8% compound annual growth rate (CAGR) through 2030, driven by continued spending on AI infrastructure and expanding workloads. This provides NVIDIA with a large and growing addressable market for its GPUs and accelerated-computing platforms, extending the company's current growth trajectory.
NVIDIA's second-quarter fiscal 2027 revenue surged 106% year over year and 18% sequentially, while Data Center revenue jumped 117% year over year and 18% sequentially to $89 billion. Management said AI demand is accelerating, with the buildout expanding beyond the major hyperscalers to multiple frontier AI labs, startups, the open-model ecosystem, enterprises, sovereign AI initiatives and physical AI. Its expanded AWS partnership, which calls for 2 million additional NVIDIA GPUs to be deployed in 2027-28, further underscores the scale and longevity of AI infrastructure investment.
NVIDIA is expanding its ability to meet surging AI demand by securing additional wafer, advanced packaging and high-bandwidth memory capacity through key manufacturing partners. It works closely with TSMC and other foundries to increase production of its latest GPUs and CPUs, while partnerships with memory suppliers such as SK hynix support HBM availability. It has more than 150 supply chain ecosystem partners in Taiwan.
NVIDIA is also securing key components well ahead of anticipated demand, helping support the ramp of its Blackwell and Rubin platforms. Wistron is an important partner expanding U.S. production. Management has said that more than 350 factories across 30 countries are ramping NVIDIA’s Vera Rubin platform. This broad manufacturing network and long-term component commitments enable NVIDIA to scale Blackwell and Rubin systems as demand continues to exceed available supply.
On the downside, rising memory prices are expected to weigh on NVIDIA's profitability, with gross margin projected to decline from 75% in the second quarter of fiscal 2027 to 71%-72% in the fourth quarter before recovering to 72%-73% in fiscal 2028 as price increases take effect. Supply constraints across wafers, advanced packaging, HBM and other components remain a near-term constraint on NVIDIA’s ability to fully meet strong customer demand. Competition from AMD and other chipmakers, along with hyperscalers developing custom AI accelerators, could pressure NVIDIA’s share of AI workloads, although the company is also positioning itself in the custom silicon market through its partnership with MediaTek.
In the last 30 days, the Zacks Consensus Estimate for 2027 (ending January) increased by 33 cents (3.7%) while the estimate for 2028 increased $2.76 (22%). Analysts currently expect revenue and earnings to grow a respective 88% and 93.5% this year followed by a respective 65.5% and 66% in the next.
In the past year, this Zacks Rank #1 (Strong Buy) stock gained 18.7%.
Price & Consensus: NVDA
Image Source: Zacks Investment Research
While the US is its largest market, followed by Europe, it’s worth noting that China still accounts for roughly a fifth of its revenues, which could be at increasing risk given the current geopolitics.
As the pandemic and geopolitics impacted the chip supply chain, and the government incentivized American companies to reshore manufacturing, TI changed its manufacturing strategy from one that opportunistically used external capacity to one on the path to source more than 95% of its wafers internally, with more than 80% on 300mm, by 2030.
To this end, it expanded its internal manufacturing capacity in 2024, with tool installations completed and production currently ramping at two 300mm wafer fabs in Richardson, Texas, one in Sherman, Texas, and one in Lehi, Utah. Another Sherman fab and a second Lehi fab are under construction.
The company is a beneficiary of an investment tax credit of up to 35% related to some of its investments in U.S. semiconductor manufacturing (expected to continue on qualified investments up to 2034). It also has an agreement with the Department of Commerce to receive direct funding of up to $1.6 billion for the two large-scale 300mm wafer fabs in Sherman, Texas, as well as the under-construction Lehi fab in Utah.
As of the end of the second quarter, TI had received $630 million of the CHIPS Act funding. The company agreed to spend more than $18 billion in U.S. manufacturing, particularly on 300mm wafer capacity by the end of 2029. With its major capacity expansion nearing completion, TI expects 2026 capital expenditures of $2-3 billion, below the elevated spending levels of recent years.
As may be expected, capacity expansion initially has a negative impact on margins, as capacity can only be filled over time. Therefore, underutilization can weigh on margins during the ramp period. If there are in addition any end market issues, such as supply chain glitches in the automotive market or cyclicality in the industrial market, the impact is compounded.
It is encouraging to note that TI has also gradually increased the share of direct sales to customers, which improves insight into their projects and timelines, thus driving sales, customer penetration and market share gains. Customer relationships also tend to be sticky because TI primarily supplies analog and embedded products, which often have long product lives and remain designed into applications for years.
In 2025, more than 80% of business came from direct customers. Since TI has a huge portfolio of thousands of products and builds capacity years in advance to ensure stable supplies even when there is uncertainty in the market, it is we positioned to attract and retain customers, grow its share of content in each design and gradually capture a growing share of the fragmented automotive and industrial markets.
Industrial and automotive each accounted for around 33% of revenue in 2025, underscoring the importance of these markets and the opportunity from growing electronic content. Data center accounted for around 9%. Strength is currently broad-based, with second-quarter growth led by industrial, data center and automotive: industrial revenue increased around 30% year over year, automotive grew in the mid-teens and data center revenue doubled.
In the last 60 days, the Zacks Consensus Estimate for 2026 increased by 79 cents (10.3%) while the estimate for 2027 increased 99 cents (11.1%). Analysts currently expect revenue and earnings to grow a respective 22.7% and 55.1% in 2026 followed by a respective 12% and 16.8% in 2027.
In the past year, this Zacks Rank #2 (Buy) stock gained 47.8%.
Price & Consensus: TXN
Image Source: Zacks Investment Research