Behind the explosive performance of the simulation chip "king" Texas Instruments Incorporated (TXN.US): semiconductor recovery has spread AI computing power to industry and automotive sectors.

Texas Instruments Incorporated (TXN.US) announced better-than-expected first-quarter performance and unexpectedly strong second-quarter guidance, causing the stock to rise by 19.43% on Thursday, marking the largest single-day increase since 2000. The recovery trend continues! Texas Instruments Incorporated's Q1 performance blossoms, Q2 guidance crushes market expectations According to the financial report, Texas Instruments Incorporated's revenue in the first quarter increased by 19% year-on-year to $48.3 billion, exceeding analysts' average expectations of $45.2 billion; operating profit was $1.808 billion, a year-on-year increase of 37%; net profit was $1.545 billion, a year-on-year increase of 31%; earnings per share increased by 31% year-on-year to $1.68, exceeding analysts' average expectation of $1.38. Meanwhile, benefiting from the surge in data center and industrial equipment spending, Texas Instruments Incorporated provided unexpectedly strong performance guidance. The analog chip giant expects second-quarter revenue to be between $5 billion and $5.4 billion, significantly better than analysts' average expectation of $4.85 billion; second-quarter earnings per share are expected to be between $1.77 and $2.05, also significantly better than analysts' average expectation of $1.57. Texas Instruments Incorporated is the world's largest manufacturer of analog chips and embedded processors. Its products perform simple but crucial functions and have a wide range of applications globally, such as converting power sources into different voltages in electronic devices. Furthermore, analog chips have played an indispensable role in various key modules and systems in electric vehicles in recent years, including power management, battery management, sensor interfaces, audio and video processing, and motor control. Analog chips convert real-world signals such as sound, temperature, pressure, and current into the digital domain, supporting scenarios such as automotive ADAS, industrial automation, IoT sensors, and smart grids. Analog ICs have a high replacement difficulty and a long design cycle, but once implemented, they have long-term stickiness. MCUs act as the "brain" of electronic devices, controlling logic and real-time operations, and are present in nearly all networked or electromechanical systems (home appliances, meters, vehicle controls, medical monitoring, etc.). Texas Instruments Incorporated's TI MSP430, C2000, and Arm-M series MCU products lead in low power consumption and industrial real-time control fields. Texas Instruments Incorporated has a market share of around 19%-20% in the global analog chip market. The company offers more than 80,000 analog, power, signal chain, and MCU products to over 100,000 large customers, penetrating almost all end markets (automotive, industrial, communications, consumer electronics, medical, etc.). This widespread coverage makes its financial reports an important indicator of the overall economic situation. It is worth noting that Texas Instruments Incorporated's recovery momentum was already evident in the first-quarter guidance for 2026 released at the end of January. Despite slightly missing market expectations in the fourth quarter of 2025, the company's first-quarter guidance significantly exceeded market expectations. The company's consecutive quarters of providing significantly better-than-expected performance guidance indicate a strong rebound in demand for analog chips and MCUs in the large industrial equipment and automotive sectors, leading to a recovery from the "darkest hours of analog demand" in 2023, especially as the anticipated "AI data center construction boom driving robust analog chip demand recovery" unfolds. Texas Instruments Incorporated has also gained a larger share of data center spending, which has been driven by the demand for artificial intelligence. Although the company does not produce high-end digital processors used for AI computing, its chips are used to control power and perform other critical functions in data centers. Its data center business currently contributes annual sales of over $1 billion, a figure that grew by over 60% in 2025 and increased by 90% in the first quarter. AI data centers are elevating analog demand (particularly power and signal chains) to a new level, but not in the explosive manner seen with GPUs/HBMs. The incremental impact on analog chip manufacturers such as Texas Instruments Incorporated from data center business will mainly be reflected in power management/protection and monitoring analog devices. Compared to GPU/ASIC/HBM, data center analog devices, propelled by the soaring wave of AI data center construction worldwide, will likely demonstrate a "more diversified, more robust, and longer cycle" recovery rhythm. Another positive signal is that Texas Instruments Incorporated is reducing spending on new factories to free up more free cash flow, which may be used to return capital to investors. In its expansion efforts, the company is going against the industry trend by not adopting the common practice of outsourcing production. Its goal is to strengthen control over the manufacturing process and leverage future demand opportunities by using more advanced production equipment. However, the cost of this strategy is a reduction in funds available for stock buybacks and dividend payments, which were previously important factors for attracting investors. Currently, Texas Instruments Incorporated is gradually reducing its large-scale investments in factory networks, including a new factory located about an hour's drive north of its headquarters in Dallas. The company's spending on new factories and equipment in the first quarter was $676 million, lower than the $1.1 billion spent in the same period last year. It still maintains a capital expenditure plan of $20 billion to $30 billion for this year. Most recently, Texas Instruments Incorporated also reached a significant deal to drive growth. In February of this year, the company agreed to acquire Silicon Laboratories for approximately $7.5 billion, with the deal expected to be completed in the first half of 2027. Semiconductors lead the highly deterministic AI track Behind the sharp rise of Texas Instruments Incorporated, the U.S. Philadelphia Semiconductor Index has set a record for the longest consecutive daily gains in history, as investors anticipate strong growth in the semiconductor industry driven by demand related to artificial intelligence. Data shows that the Philadelphia Semiconductor Index rose by 1.71% on Thursday, achieving its 17th consecutive trading day of gains. Since April, the index has accumulated nearly a 33% increase, potentially becoming the largest monthly increase since February 2000. This rally is the latest example of semiconductor stocks leading the overall U.S. market. The launch of ChatGPT has ignited the modern artificial intelligence era, driving this long-standing trend. Major companies are making massive investments in AI-related infrastructure, particularly driving the growth in demand for chips. Industry experts state, "Due to the drive of artificial intelligence, demand is very strong, and it can be expected that there will continue to be massive investment in AI in the foreseeable future. From a valuation and growth perspective, this industry remains attractive, which is not only beneficial for the semiconductor stocks as a whole but also positive for the entire market." Data shows that the semiconductor industry's revenue is expected to grow by approximately 57% in 2026, twice the overall technology industry growth rate and significantly higher than the expected 9.3% growth of the S&P 500 index. A recent survey by Bank of America shows that "going long on semiconductors" has become one of the hottest trades in the global market. Goldman Sachs Group, Inc. holds a positive view on the semiconductor industry in its latest research report, expecting that the surge in demand related to AI will further drive the sector higher. Buy-side institutional investors are also concentrating funds from software and internet platforms towards the semiconductor hardware industry chain.