ADI vs. TXN: Which Semiconductor Stock Has an Edge Now?

Analog Devices ADI and Texas Instruments TXN are two of the most prominent semiconductor manufacturers in the analog signal processing space that serve industrial, automotive and consumer electronic industry applications.

With the recent boom in the semiconductor industry, the question remains: Which stock has more upside potential? Let us break down their fundamentals, growth prospects, market challenges and valuation to determine which offers a more compelling investment case.

The Case for ADI Stock

ADI is benefiting from its strong market position in high-performance analog systems, especially in the industrial, communications infrastructure and consumer markets. In the third quarter of fiscal 2025, ADI’s industrial, automotive, communications and consumer segments grew 22.9%, 22.4%, 40.5% and 21.3%, respectively.

ADI’s industrial segment is showing a double-digit growth rate on the back of demand growth from instrumentation, automation, healthcare, aerospace and defense, and energy management companies, as discussed on its earnings call. ADI expects its automation business to double by 2030, which would be the major driving factor in this segment.

Analog Devices’ communications segment benefits from traction in 5G, satellite and terrestrial broadband, optical and cable networking equipment for data center, carrier and data storage. ADI’s consumer segment is experiencing traction across handsets, gaming, hearables and wearables categories.

ADI’s automotive segment is growing on the back of next-generation Advanced Driver Assistance Systems, power management and connectivity. The strong top-line growth is also helping ADI to broaden its margin, given its controlled expenditure on overhead, R&D, and SG&A, improving its operating margin and cost structure.

The Zacks Consensus Estimate for ADI’s fiscal 2025 and 2026 margins are expected to grow 21.5% and 18.5%, respectively. The estimate for ADI’s fiscal 2025 earnings has remained unchanged for the past 60 days, while the estimate for ADI’s 2026 earnings has been revised downward in the past 30 days.

The Case for TXN Stock

Texas Instruments’ analog segment grew 16% year over year to reach $3.73 billion in the third quarter of 2025. This massive growth has been on the back of the ongoing semiconductor cycle recovery in industrial, personal electronics, enterprise systems, and communications end markets.

To keep its dominance across industries, the emergence of 5G technology, AI and high performance computing space, TXN is prioritizing chip manufacturing under its internal manufacturing facilities instead of relying on outside foundries. The company aims to manufacture more than 95% of its wafers internally by 2030.

By building its internal manufacturing, the company will gain better control over production, quality and costs. Texas Instruments has been awarded up to $1.6 billion in CHIPS Act funding, with total benefits from the program expected to reach $7.5 billion to $9.5 billion over its lifetime.

However, Texas Instruments faces significant exposure to geopolitical risks, particularly in China, which accounted for approximately 20% of its 2024 revenues. While the company reported growth in China, rising geopolitical tensions and potential trade restrictions could impact future performance.

Furthermore, slow recovery across the automotive end market might hurt Texas Instruments’ overall growth prospects. Its automotive segment is recovering slowly compared to other markets. The Zacks Consensus Estimate for TXN’s 2025 and 2026 revenues indicates year-over-year growth of 13% and 6.7%, respectively. The consensus mark for EPS suggests a robust year-over-year improvement of 5% for 2025 and 9.3% for 2026.

ADI vs. TXN: Price Performance and Valuation

Year to date, TXN shares have declined 14% compared with the 12.7% growth in ADI shares.

On the valuation front, ADI trades at a forward 12-month P/S multiple of 9.56X, significantly higher than Texas Instruments’ 7.81X.

Conclusion: ADI vs. TXN

Although both TXN and ADI are established players in the analog signal processing space, TXN is facing multiple near-term headwinds like geopolitical risks and slow recovery in the automotive end market. This is not the case for ADI, which is performing extraordinarily well at present.

ADI carries a Zacks Rank #3 (Hold), making it a clear winner over TXN, which has a Zacks Rank #4 (Sell) at present.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

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