FILE PHOTO: A Texas Instruments logo appears in this illustration taken August 25, 2025. REUTERS/Dado Ruvic/Illustration/File Photo
Jan 28 (Reuters) - Texas Instruments' shares gained 7% in premarket trading on Wednesday after its rosy quarterly forecast showed the AI data center boom was driving demand for chips beyond Nvidia's advanced processors.
TI on Tuesday forecast first-quarter profit and revenue above estimates, powered by strong analog sales, especially in data center.
TI makes analog chips for converting signals and managing power in data centers, unlike Nvidia's fast, high-priced AI graphics chips, and has benefited from a surge in demand from tech companies ramping up compute infrastructure to power their AI ambitions.
Data center may help support growth into 2026, Bernstein analysts said.
But capex concerns remain a potential headwind, some analysts said.
"TI will participate in the upturn; that should be relatively uncontroversial," Morgan Stanley analysts said in a note.
"But five years of capital spending has brought return on equity down substantially, as equity has grown almost 70% in 5 years, with property, plant, and equipment (PP&E) up four times over that time frame," while net income has stayed about the same from one cycle to the next, Morgan Stanley added.
A global shortage of memory chips has also cast a shadow over end-market demand in the personal electronics space, with researchers expecting sales of smartphones and personal computers - a key market for TI - to be impacted.
But a supply shortage for TI was unlikely due to low factory utilization worldwide, although geopolitical risks remain unpredictable and U.S.-focused production could expose TI to tariffs abroad, Morgan Stanley added.
For the first quarter, TI expects revenue between $4.32 billion and $4.68 billion, above the $4.42 billion estimated by LSEG.
"We need another consecutive quarter of growth to gain confidence in sustainability, consistent with CEO Haviv Ilan's comment that 'we'll have to see how it plays out'," Morgan Stanley noted.
The stock lost 7.5% of its value in 2025, giving it a 12-month forward price-to-earnings ratio of 30.95, compared with 29.50 for rival Analog Devices.
(Reporting by Akriti Shah in Bengaluru; Editing by Maju Samuel)
