Texas Instruments Stock: Powering AI Beyond The GPU

AI has pushed Texas Instruments (TXN) stock to near all-time highs, with shares surging roughly 70% year to date.

TI makes none of the AI compute chips everyone talks about, like Nvidia’s (NVDA ) GPUs and Broadcom’s (AVGO) custom chips. Instead, it builds analog and embedded processing chips: power management ICs, voltage regulators, and amplifiers, the unglamorous components that keep electronics running. For decades, this made TI a steady, cyclical industrial semiconductor company, the kind of name that moved with factory orders and auto production.

That’s changing. TI’s chips sit inside every AI server, regulating and distributing the enormous amounts of power modern GPUs consume. The market has taken notice, rewarding the stock with a forward earnings multiple of roughly 39x, rich for a company historically viewed as a slow-growth cyclical.

An Upcycle, Not A Peak

TI’s largest end market, industrial, is still recovering. Industrial revenue grew more than 30% year over year last quarter, marking eight straight quarters of sequential growth, yet the segment remains roughly 15% below its prior peak. That gap matters. A recovering cycle with room left to run supports a higher multiple than a business already at the top of its cycle. Earnings should continue to improve as the recovery unfolds. Management guided second-quarter revenue to $5.0 billion to $5.4 billion, well above analyst estimates, with growth expected across both industrial and data center markets.

The AI Data Center Angle

Every AI server needs more than just GPUs, memory, and networking. It also requires a network of analog chips that convert, regulate, and monitor electricity, synchronize high-speed data flowing between processors and memory, and ensure the system operates reliably under heavy workloads. Without these components, the GPUs cannot be powered or communicate efficiently. As AI servers become larger and more power-intensive, the amount of analog content per server continues to increase.

TI has built the largest data center business in the analog semiconductor industry, generating approximately $1.5 billion in revenue in calendar 2025, up 64% year over year. Growth accelerated further in the first quarter of 2026, with data center revenue rising 90%, driven by demand for general-purpose amplifiers, clocking chips, and voltage references. See TI’s revenue by segment

The opportunity is likely to grow. AI servers consume several times more power than traditional computing hardware, pushing data centers toward higher-voltage architectures such as 800V DC to reduce transmission losses as rack densities climb. More advanced networking, higher-bandwidth memory, and increasingly complex power delivery systems also require additional sensing, isolation, monitoring, and voltage regulation, steadily increasing analog semiconductor content per server.

Unlike AI chipmakers, TI does not depend on backing the winning accelerator architecture. Every AI server needs power management and analog chips regardless of whether it uses GPUs or custom AI processors. While TI competes with several analog and power semiconductor suppliers, its low-cost 300 mm manufacturing footprint, broad product portfolio, and long-standing customer relationships position it well to capture a meaningful share of this growing market. Bank of America projects that TI’s data center revenue could reach roughly $4.5 billion by 2028, or about 18% of company sales, up from roughly 11% to 12% today.

Why This Supports The Multiple

TI is benefiting from two growth engines at once: an industrial recovery that appears to have genuine runway left and a structural AI infrastructure build-out that increases analog content per server. That combination is unusual for a company once viewed primarily as a cyclical industrial supplier, helping explain why investors are willing to pay roughly 39x forward earnings. While the multiple leaves little room for disappointment, it appears supported by durable secular tailwinds rather than peak-cycle optimism.

TI’s recent gains highlight how companies with leadership in critical semiconductor technologies can benefit from powerful long-term industry trends such as AI and advanced chip manufacturing. Even so, no single company is immune to swings in semiconductor spending, customer concentration, or valuation risk. A disciplined portfolio approach helps smooth these risks while still participating in long-term growth themes. The Trefis High Quality (HQ) Portfolio has consistently outperformed its market benchmark since inception, delivering cumulative returns of over 105%.