Texas Instruments (TXN.US) saw its shares surge approximately 6.5% in pre-market trading on Wednesday after reporting its fourth-quarter results and latest outlook. The market perceives that the growth opportunities from the global wave of data center construction are spilling over from GPU and server manufacturers into a broader range of semiconductor segments, including analog chips, power management, and network connectivity. Driven by this trend, shares of several peer companies also strengthened in pre-market trading. Analog Devices (ADI.US) and Infineon Technologies (IFNNY.US) both rose about 4%, STMicroelectronics (STM.US) gained 2.2%, and Microchip Technology (MCHP.US) climbed 6%. Jefferies analyst Blayne Curtis noted in a research report that the data center business is becoming a significant driver of revenue growth for Texas Instruments. The firm estimates the company's data center-related revenue for Q4 fiscal 2025 was approximately $450 million, showing a mid-single-digit percentage increase sequentially. For the full year, data center revenue reached about $1.5 billion, surging 64% year-over-year. Notably, Texas Instruments has started reporting the data center as a separate end market, further segmented into computing (45%), networking (35%), and power delivery (20%). Jefferies believes the future growth trajectory of this segment will likely be highly correlated with the capital expenditures of global hyperscale cloud providers. Beyond data centers, Jefferies also mentioned improving demand in the industrial end-market, while growth in the automotive market remains relatively moderate. However, the firm emphasized that while the overall performance offers a "modest positive" for the industry cycle, it did not significantly exceed market expectations. Personal electronics and automotive businesses could still pose potential headwinds to the analog chip recovery. Consequently, Jefferies maintained its "Hold" rating on Texas Instruments but raised its price target from $180 to $210. Morgan Stanley, on the other hand, maintained a cautious stance. Analyst Joseph Moore stated that while they anticipated a seasonally better-than-expected performance from Texas Instruments, they need to see more consecutive quarters of growth data to build confidence in the sustainability of the recovery. Morgan Stanley continued to rate the stock "Underweight" and slightly increased its price target to $180. In contrast, Bank of America expressed greater optimism about the company's prospects. The bank upgraded Texas Instruments from "Underperform" to "Neutral" and raised Microchip Technology's rating from "Neutral" to "Buy." Simultaneously, Bank of America substantially increased its price target for Texas Instruments to $235 and raised Microchip Technology's target to $95. Bank of America analyst Vivek Arya pointed out that the "analog chip recovery" signal conveyed in Texas Instruments' first-quarter outlook is very clear and was corroborated by discussions with several leading analog chip companies during CES. Arya believes that while macroeconomic uncertainties persist, the relatively less crowded analog chip sector is poised to regain market attention. Key drivers include industrial inventory restocking (where shipments remain 15%-20% below trend), new incremental demand from data center power and connectivity, growth in the aerospace and defense markets, and structural opportunities from increased electronic content in automobiles.
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