Texas Instruments (NASDAQ:TXN) faces mounting pressure as macroeconomic headwinds collide with a rich valuation, signaling tighter near-term growth prospects for the semiconductor giant.
Bank of America (BofA) analyst Vivek Arya downgraded Texas Instruments to Underperform from Neutral and slashed the price forecast to $190 from $208.
The bearish stance reflects the analyst’s view that global tariff uncertainty will limit the near-term recovery of industrial demand.
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With minimal exposure to the AI capex cycle, unlike peers such as Infineon (OTC:IFNNY), Texas Instruments trades at a premium 25x/31x calendar year 2026 estimates P/E on consensus/BofA estimates, higher than Analog Devices (NASDAQ:ADI) despite lower free cash flow (FCF).
The analyst writes that Texas Instruments’ trailing 12-month FCF margin is just 9%, though it could expand in calendar year 2026 if capital expenditure declines to about $2 billion from $5 billion.
However, reducing capex may be difficult if the company aims to benefit from CHIPS Act incentives fully, adds the analyst.
Arya says that weak demand could also lead to lower fab utilization, pressuring gross margins, especially given inventories at 231 days, compared to a five-year average of 174.
The analyst notes that historically, the company has issued conservative fourth-quarter guidance, which is typically 3% below consensus for sales and 7% for EPS.
Overall, the analyst cut the EPS estimate by about 3% to $6.05 (8% below consensus) for fiscal 2026 and 3% to $6.91 (13% below consensus) for fiscal 2027.
Texas Instruments will report its third-quarter 2025 earnings after the market closes on Tuesday, October 21, 2025.
Investors can gain exposure to the stock through the First Trust NASDAQ Technology Dividend Index Fund (NASDAQ:TDIV) and FT Vest Technology Dividend Target Income ETF (NYSE: TDVI).
Price Action: TXN shares were trading higher by 2.03% to $175.18 at last check Monday.
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