Texas Instruments Incorporated (TXN): A Bull Case Theory

We came across a bullish thesis on Texas Instruments Incorporated on Best Anchor Stocks’s Substack. In this article, we will summarize the bulls’ thesis on TXN. Texas Instruments Incorporated's share was trading at $225.01 as of February 2nd. TXN’s trailing and forward P/E were 41.29 and 33.56 respectively according to Yahoo Finance.

Texas Instruments Incorporated designs, manufactures, and sells semiconductors to electronics designers and manufacturers in the United States and internatonally. TXN reported a strong Q4, contrasting with prior quarters by delivering relatively soft results but exceptionally robust guidance, which drove a notable post-earnings stock increase.

The company highlighted growth across all end markets in 2025, including industrial ($5.8B, +12%), automotive ($5.8B, +6%), personal electronics ($3.7B, +7%), communications ($0.5B, +20%), and data center ($1.5B, +64%), with the latter emerging as a key growth driver.

Management also began reporting data center as an independent segment earlier than expected, reflecting its strategic importance and positioning TXN as increasingly exposed to AI-related investments. Core segments—industrial, automotive, and data center—now comprise 75% of revenue, indicating a structural shift toward higher-margin, growth-oriented markets.

Despite strong guidance, management emphasized that pricing assumptions remain largely unchanged, and the company’s short lead times and customer-friendly policies mean orders could still fluctuate.

Operationally, free cash flow (FCF) surged 94% in 2025 to a 17% margin, despite elevated inventory and capex from recent investment cycles. With expected normalization of capex and continued revenue growth, TXN projects FCF in 2026 to reach approximately $6.4–7.0 billion, or $7 per share, reflecting conservative assumptions excluding potential grants or ITC benefits. This provides a solid foundation for cash generation, underscoring both resilience and upside potential.

Overall, TXN’s performance illustrates a gradual but meaningful recovery, supported by secular growth in semiconductors across multiple end markets, accelerating data center adoption, and strong FCF generation. The combination of structural growth, high cash conversion, and conservative guidance creates a compelling investment case with substantial upside potential, particularly if market conditions support faster-than-expected cyclical recovery or additional capital efficiency measures.

Previously, we covered a bullish thesis on Texas Instruments Incorporated (TXN) by The Wolf of Harcourt Street in January 2025, which highlighted early signs of analog revenue stabilization, strategic manufacturing investments, and a slow cyclical recovery. TXN’s stock price has appreciated by approximately 21.44% since our coverage. Best Anchor Stocks shares a similar perspective but emphasizes data center growth, AI exposure, and rising free cash flow.

Texas Instruments Incorporated is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 72 hedge fund portfolios held TXN at the end of the third quarter which was 68 in the previous quarter. While we acknowledge the risk and potential of TXN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than TXN and that has 10,000% upside potential, check out our report about this cheapest AI stock.

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Disclosure: None.