Should You Hold on to TXN Stock Despite its 12% Dip in a Month?

Texas Instruments TXN shares have lost 12.3% in the past month, underperforming the Zacks Semiconductor - General industry, Zacks Computer and Technology sector and the S&P 500 index’s decline of 4.8%, 5% and 2.1%, respectively.

This steep decline raises the question: Should investors cut their losses and exit, or is it worth holding on to? While the near-term headwinds are real, the long-term growth story for Texas Instruments remains intact, making a strong case for holding the stock.

TXN One Month Price Performance Chart

Reason Behind TXN Stock’s Underperformance

TXN’s recent decline stems from a mix of broader market weakness and company-specific concerns. A widespread sell-off in tech stocks, triggered by fears of rising trade tensions and slowing economic growth, has put pressure on the entire sector, including Texas Instruments.

The U.S. government’s recent stance toward China has also been a matter of concern for Texas Instruments as the company generates significant revenues (about 20% of its 2024 total revenues) from the Chinese market. Growing geopolitical tension, fear of fresh sanctions and persistent tariff threats have added to investors’ skepticism.

Additionally, investor concerns related to the softness across Texas Instruments’ industrial, automotive and enterprise systems end markets have also contributed to TXN’s stock price decline. Its industrial and automotive end markets, which combinedly accounted for approximately 70% of TXN’s revenues, reported a sequential decline in the fourth quarter of 2024.

However, not everything is gloom and doom for this semiconductor manufacturing giant.

TXN's Strategic Moves to Accelerate Recovery

TXN is taking several strategic measures to fuel its recovery. As the industrial and automotive markets remain sluggish, TXN is using this time to build its inventory. TXN’s healthy inventory levels of $4.5 billion have positioned the company to instantly meet customer demand once the market rebounds, enabling the company to avoid a sudden production ramp-up.

Texas Instruments had previously purchased a factory from Micron Technology MU and converted the facility to support the production of Analog and Embedded semiconductor products. To scale up its Lehi facility in Utah, the company is now investing in a second factory. Increased production capacity will enable it to capture more market share.

Adding to its fortunes, TXN recently obtained $1.6 billion in funding from the U.S. government under the CHIPS Act program. Texas Instruments is leveraging this fund to support new 300mm wafer fabs in Texas and Utah, bolstering the company’s position as a sturdy supplier of analog and embedded chips worldwide.

Texas Instruments’ Rich Partner Base Aids Growth

Texas Instruments has a rich partner base. Alongside semiconductor partners like Micron Technology, TXN has also partnered with companies, including Apple Inc. AAPL and LeddarTech Holdings Inc. LDTC, in consumer and automotive end markets.

Micron Technology is TXN’s chipset partner, providing memory support for TXN’s products. Micron Technology’s DRAM, LPDRAM, NAND flash, NOR flash and eMMC are qualified for TXN’s platform.

Apple not only integrated TXN’s semiconductor chips in its products, but has also invested in Texas Instruments’ Utah factory. LeddarTech has collaborated with Texas Instruments to integrate TXN’s advanced TDA4 processors in LeddarTech’s LeddarVision advanced driver assistance systems solution.

With all these factors at play, the Zacks Consensus Estimate for TXN’s 2025 revenues is pegged at $17.1 billion, indicating year-over-year growth of 9%. The consensus mark for earnings is pegged at $5.35 per share, suggesting a 2.9% year-over-year increase.

Texas Instruments beat the Zacks Consensus Estimate in each of the trailing four quarters, with an average surprise of 8.9%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Conclusion: Hold Texas Instruments Stock Now

Despite a challenging macroeconomic environment and softness in industrial, automotive and enterprise systems end markets, Texas Instruments’ business remains stable on the back of new production facilities, healthy inventory levels and a strong partner base. Considering all these factors, we suggest that it is wise for investors to retain this Zacks Rank #3 (Hold) stock at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research