Research · Initiation · 6 October 2026
Texas Instruments Nasdaq: TXN
Texas Instruments' data centre business is real. At US$295, the shares already pay for a full analog upturn as well.
The call No call
- Price at publication
- US$294.90close, 5 October 2026
- Target
- Noneno position at this price
- Conviction
- Medium
What would prove the thesis wrongFull year 2027 revenue reaches US$26 billion or more with data centre above 15 per cent of it, or gross margin reaches 65 per cent or more in any quarter to June 2027, or the shares trade above US$340 by October 2027 without either.
What would turn this into a callA price below about US$244, or data centre reaching 15 per cent of TI's revenue while industrial sales are still growing.
Read the full notePDF, 5 pages: thesis, valuation, scenarios, risks and sources Open the modelExcel, live formulas: change an assumption and the target moves
The call in brief
- Texas Instruments makes the small power chips that step electricity down to an AI processor. Its data centre sales doubled in a year, and on my working they reached about 12 per cent of revenue in the second quarter, up from 9 per cent for 2025.
- Data centre supplied about a third of TI's growth in that quarter. The rest came from the analog upturn in factories and cars, and that cycle moves my 2028 earnings two and a half times as much as data centre does.
- TI's six-year factory build is nearly done. Capital spending falls to US$2 to 3 billion in 2026 and free cash flow is recovering, but depreciation has more than doubled since 2022, so the margin now swings harder with the cycle.
- At US$294.90 the shares trade at 35 times my 2026 earnings and 29 times my 2027. At 25 times, the price needs 2028 revenue about 36 per cent above the 2022 peak.
- My call is no call: the base case is worth about US$280, and a turn in the analog cycle would cost more than continued strength would add.