Texas Instruments Incorporated TXN has had a rough three months, with its stock declining 7.3% and underperforming the Zacks Semiconductor – General industry. It has also lagged behind major semiconductor players such as Micron Technology MU, Marvell Technology MRVL and Broadcom AVGO. This underperformance is largely due to weaker demand in its key industrial and automotive markets, pressure on margins and elevated capital expenditures.

Three-Month Price Return Performance

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Despite these challenges, TXN remains one of the strongest long-term semiconductor plays, thanks to its dominance in analog and embedded processing, shareholder-friendly capital return policies and strategic investments in advanced manufacturing capacity. While near-term headwinds persist, holding the stock remains the best approach for now.

TXN’s Revenue Growth Faces Short-Term Challenges

Texas Instruments’ fourth-quarter 2024 revenues came in at $4.01 billion, which slightly beat expectations but still reflected a 1.72% year-over-year decline. The company’s earnings per share (EPS) of $1.30 also exceeded estimates, but semiconductor demand remains weak, particularly in industrial and automotive markets, which make up 70% of total revenues.

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In the fourth quarter, industrial revenues declined by a low-single-digit percentage sequentially, while automotive revenues fell by a mid-single-digit percentage. Management’s guidance for the first-quarter 2025 revenues of $3.74 billion to $4.06 billion suggests another 3% sequential decline, reinforcing concerns about short-term demand weakness.

While these numbers indicate continued softness in Texas Instruments’ key segments, they also reflect the cyclical nature of the semiconductor industry. The long-term demand for power management, factory automation and electric vehicles (EVs) remains intact, making TXN well-positioned for future recovery.

Technical Weakness Suggests Near-Term Pressure on TXN Stock

From a technical standpoint, TXN stock is trading below its 50-day moving average, which is often seen as a bearish signal. This suggests that short-term downward pressure could continue, particularly if broader semiconductor weakness persists.

50-Day Moving Average Signals Bearish Trend

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However, investors should look beyond short-term technical trends. TXN’s long-term fundamentals remain solid, and a rebound is likely once demand in industrial and automotive markets stabilizes.

Industrial & Automotive Segments to Fuel TXN’s Future Growth

Despite the current softness, Texas Instruments’ focus on industrial and automotive markets remains its biggest long-term strength. These sectors require longer product lifecycles and more stable demand compared to consumer electronics, making TXN’s revenue base less volatile over time.

Texas Instruments sees secular growth opportunities in factory automation, robotics and energy infrastructure, all of which are becoming more reliant on high-performance analog and embedded processing chips. Meanwhile, the automotive segment — despite a mid-single-digit decline in the fourth quarter — remains a key driver of future growth, particularly as EV adoption and demand for advanced driver-assistance systems (ADAS) accelerate.

While current industrial and automotive demand remains weak, Texas Instruments’ positioning in these markets ensures it will benefit from the next semiconductor upcycle, expected in late 2025 or early 2026.

Capacity Expansion to Strengthen TXN’s Competitive Edge

Texas Instruments is nearing the completion of its six-year capital expenditure (CapEx) cycle, which has focused on expanding low-cost 300mm wafer fabrication capacity. This investment is a strategic move to reduce long-term production costs and strengthen margins.

The company’s new fabrication facilities in Texas and Utah will allow Texas Instruments to increase production at a lower cost, reducing dependence on external suppliers. While the near-term impact on margins is negative due to high CapEx spending, these investments will ultimately enhance TXN’s competitive position and improve long-term profitability.

Additionally, Texas Instruments secured $1.6 billion in CHIPS Act grants to support its expansion, with total funding expected to reach $7.5 billion to $9.5 billion over the coming years. This will offset some capital expenses and further strengthen its cost advantage.

Strong Shareholder Returns Make TXN a Stable Hold

Despite ongoing industry headwinds, Texas Instruments remains one of the most shareholder-friendly semiconductor companies. In 2024, TXN increased its dividend by 5% for the 21st consecutive year, underscoring its commitment to returning capital to investors.

Texas Instruments returned $5.7 billion to shareholders in 2024 through dividends and stock buybacks, reinforcing its reputation as a reliable income-generating stock. Additionally, TXN generated $6.32 billion in operating cash flow, providing a solid foundation to sustain its dividend and buyback programs even during industry downturns.

This focus on consistent capital returns makes TXN an attractive stock to hold, particularly for long-term dividend investors.

TXN’s Valuation is Becoming More Attractive

Texas Instruments currently trades at a forward 12-month price-to-earnings (P/E) ratio of 33.93, slightly below the industry average of 35.54.

While this suggests that Texas Instruments is not significantly undervalued, its stock is now cheaper relative to its historical valuation range. Investors looking for a strong semiconductor stock with long-term stability may find TXN more attractive at these levels.

Forward 12-Month P/E Ratio

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Conclusion: Hold TXN Stock for Now

Texas Instruments’ 7.3% decline over the past three months reflects short-term semiconductor industry challenges, but it does not change the company’s strong long-term fundamentals.

With a dominant position in analog and embedded processing, a disciplined capacity expansion strategy and a commitment to shareholder returns, TXN remains one of the best-positioned semiconductor stocks for long-term growth. However, with near-term demand still weak and CapEx spending weighing on margins, the immediate upside may be limited.

For now, investors should hold Texas Instruments stock, waiting for either a better buying opportunity or clearer signs of an industry recovery before adding more exposure. Currently, TXN carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Texas Instruments Incorporated (TXN) : Free Stock Analysis Report

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