Texas Instruments riding AI power-chip demand to 58% rally

Texas Instruments has emerged as an unlikely beneficiary of the artificial intelligence infrastructure boom. The company supplies analog chips—components that manage and distribute electrical power—to data centers deploying AI processors. These chips perform a critical function: they sit between the electrical grid and AI processors, converting and regulating power in a way that allows the processors to operate without overheating. While less visible than the AI chips themselves, this infrastructure is non-negotiable for large-scale AI deployment.

The stock performance reflects a fundamental shift in the company's growth trajectory. After five years of stagnation, Texas Instruments has rallied 58% year-to-date as revenue growth accelerated sharply. In the second quarter, revenue grew 23% year-over-year—the highest growth rate in multiple years. Looking ahead, the company has guided for Q3 revenue of $5.65 billion（約9000億円） to $6.15 billion（約9800億円）, with a midpoint of $5.9 billion（約9400億円）. That midpoint implies 24.5% year-over-year growth, suggesting momentum is not slowing. More ambitiously, if the company's analog chips continue to gain ground in data centers and it beats the top end of its Q3 guidance, Texas Instruments could post at least 38% year-over-year revenue growth.

Profitability is accelerating even faster than the top line. Net income rose 53% year-over-year in Q2, outpacing the 23% revenue gain and pointing to strong operating leverage. CEO Haviv Ilan has framed the company's strategy around maximizing free cash flow per share through disciplined capital allocation and efficiency gains. This philosophy explains why Texas Instruments has maintained a dividend yield above 2% despite its rapid growth—the company prioritizes returning cash to shareholders while investing in competitive advantages. The company also barely beat the top end of Q2 guidance when reporting results, suggesting a degree of caution in forward projections, though management's track record and the momentum in data center analog chips suggest upside potential if the company can outperform in Q3.

Texas Instruments had languished for five years before the AI boom, with the stock mostly flat until this year's 58% rally. The catalyst is straightforward: the company's analog chips address a critical bottleneck in AI infrastructure. As data centers deploy more AI processors, they need reliable power delivery at scale, and Texas Instruments supplies the bridge between the electrical grid and the chips themselves. This is less glamorous than designing the AI processors themselves, but it is essential infrastructure.

The company's fundamentals reflect strong execution. Q2 revenue growth of 23% year-over-year marked the highest rate in multiple years, and Q3 guidance points to sustained momentum with a midpoint implying 24.5% year-over-year growth. More tellingly, net income rose 53% year-over-year in Q2—faster than the revenue gain—indicating operating leverage and disciplined cost management. CEO Haviv Ilan's emphasis on free cash flow per share rather than headline earnings, combined with the company's maintenance of a dividend yield above 2% despite rapid growth, suggests management confidence in both near-term prospects and long-term sustainability.

No comments yet. Be the first to share your thoughts!