Texas Instruments Stock Forecast: Can AI Demand Push TXN Above $279 Next Week?

Quick overview

This week Texas Instruments (TXN) trades at about $278.05. The stock is above its important breakout level of $275.21 and is currently testing the resistance at $278.72. There are positive trends in Artificial Intelligence (AI) and data centers. Additionally, positive trends are in the industrial and automotive markets. Further, positive trends are in Texas Instruments’ free cash flow and the company’s capital expenditures. Texas Instruments is expected to continue its uptrend to $281.75 and $284.67. If the stock trades below $275.21, it will invalidate the uptrend. If Texas Instruments trades above $279, it is expected to continue higher. This is my expectation for next week.

AI Data-Center Demand Is Becoming a Bigger Growth Driver

The role of AI in TI’s future is quite bright. Currently, TI’s business is heavily weighted toward the industrial and automotive markets. Data centers are important to TI because hyperscale companies build large, power-intensive data centers to house AI. Inside servers and data center power and connectivity infrastructure are made up of numerous analog components. This creates an opportunity for TI to gain revenue from the AI adoption cycle without producing GPUs. In the first quarter, TI started separating its data center revenue from its other business, and this is likely to continue because data center revenue has been growing. In addition, the focus on AI infrastructure also gives TI an opportunity to gain revenue from Campus Edge, AI and HPC (High Performance Computing) infrastructure.

Q2 Results Show the Recovery Is Broadening

Growth has historically been tied to a particular end market, but recent growth is more broad-based. In the second quarter, revenue increased 23% to $5.46 billion and operating profit increased 48% compared to the second quarter of 2020. TI also reported that net income increased by 53% to $1.98 billion. Management noted positive business trends in TI’s industrial and automotive business, as well as in TI’s data center business. Broad-based business trends are positive and should help TI sustain improved business trends in its end markets, particularly since business trends in prior years were adversely impacted due to business corrective actions that TI had to take in its embedded and analog markets.

Q3 Guidance Keeps Momentum Intact

Texas Instruments projects revenue in the range of $5.65 to $6.15 billion for the current quarter. EPS is projected to be in the range of $2.23 to $2.57. Investors should keep in mind EPS was $2.71 in the previous quarter. Cash flow continues to be strong. In the last 12 months, the company generated $8.7 billion cash from operations, and $6.5 billion cash from operations after adjusting for capital expenditures. The amount invested in manufacturing will need to provide better returns for equity holders, and greater free cash flow.

Dividend Increase Adds a Fresh Shareholder Catalyst

The most recent firm-specific news is TI increasing its dividend by 7% to $1.52 on September 17. With the announcement, TI increased its dividend for the 23rd consecutive year. Along with its business as a semiconductor firm, TI is establishing itself as a leading firm in return on investment. Should its cash flow continue increasing and capital expenditures continue decreasing, TI could place greater emphasis on its share repurchase and dividend policy.

Lower Capital Spending Could Improve Free Cash Flow

TI has a strategy focused on manufacturing. With funding from the CHIPS Act, TI added manufacturing capability with 300mm process technology. TI expects its spending on manufacturing to be significantly lower in 2026 and beyond. The company has an opportunity to improve its margins and cash flow if the manufacturing capacity has a positive impact on its cash flow. If the capacity is used to a greater extent, cash flow from that manufacturing capacity can also improve.

Silicon Labs Deal Adds a Longer-Term Growth Angle

The $7.5 billion purchase of Silicon Labs by TI strengthens their embedded wireless offerings. Analysts believe it could create $450 million in manufacturing and operational synergies. The reason for the acquisition makes sense. TI has leading embedded and analog offerings and Silicon Labs offers a wide range of connectivity solutions for the industrial and automotive markets and other emerging devices.The main risk with this acquisition is if TI is not able to achieve their margin targets and synergies from the acquisition. Other large acquisitions have taken longer to integrate and realized the expected financial benefits.

The Main Risk Is Another Analog Inventory Correction

The main short-term risk is cyclical. There can be quick changes in the semiconductor market, especially with industrial and automotive customers. With the current market conditions, it is possible that TI goes through another digestion phase due to customer over-orders. Changes in the economy and customer orders can quickly affect TI. Demand is affected by several factors, such as consumer spending and government policies. Next week should give more clarity on whether the economy and the stock market are still decoupled. Because of the momentum in the stock price, traders are looking for longer term buying to support the breakout.

Texas Instruments Technical Analysis: $278.72 Is the Next Breakout Test

Texas Instruments is currently trading at around $278.05 and recently broke above the resistance at $275.21. Price hasn’t retraced back toward the breakout region and is currently trading above it. A rising trendline and both moving averies are also providing additional support. The 1 hour chart is currently bullish. The next bullish target is expected around the $278.72 resistance level. If that level is broken, the next target is expected around the $281.75 and $284.67 levels. Support is expected at $275.21 and if that level is broken, additional support is expected at the $272.36, $269.91 and $266.94 levels. 

The Relative Strength Index (RSI) is currently at 63 and is suggesting that the stock is in mild overbought territory. The RSI has previously trended in overbought territory and did not indicate a reversal.  The bullish outlook will remain as long as Texas Instruments is trading above $275.21 and the rising trendline. If Texas Instruments trades below the $275.21 and $272.36 levels, the trendline will be at risk of revering and breaking. A breakdown below $266.94 would negate the bullish view.

Frequently Asked Questions

Can Texas Instruments stock break $279 next week?

Yes, but we will need to see a move above $278.72 to give us the green light for a continuation move. From there, we expect moves towards $281.75 and $284.67.

What is supporting Texas Instruments stock?

The main positives are increasing AI and data-center demand, expanding industrial and automotive activity, decreasing CAPEX and rising free cash flow.

What is the key TXN support level?

The first important support level is approximately $275.21. A fall below $272.36 would make this short-term outlook bearish.

Arslan Ali Butt

Lead Markets Analyst – Multi-Asset (FX, Commodities, Crypto)

Arslan Ali Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.

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