Ricardo Pillai
3 min read
In This Article:
We came across a bullish thesis on Texas Instruments Incorporated (TXN) on Next Gen Investors Endowment’s Substack by Judah Kang. In this article, we will summarize the bulls’ thesis on TXN. Texas Instruments Incorporated (TXN)'s share was trading at $199.66 as of 12th June. TXN’s trailing and forward P/E were 37.81 and 36.36 respectively according to Yahoo Finance.
A close-up of a complex network of integrated circuits used in logic semiconductors.
Texas Instruments (TI) represents a compelling long-term opportunity as a dominant player in analog and embedded semiconductors, now trading at an attractive valuation amid temporary headwinds. The company benefits from a wide moat driven by its unmatched scale, broad product portfolio, and sticky customer relationships across structurally growing industries like automotive, industrial automation, and communications.
With over 80,000 analog products and a significant embedded processing business, TI holds leadership in key segments where switching costs are high due to long design cycles and system integration complexity, resulting in multi-year recurring revenue streams. Approximately 70% of TI’s revenue is derived from the industrial and automotive sectors, both of which are growing at double-digit CAGRs and rely on TI’s chips for mission-critical applications such as ADAS, powertrain systems, factory automation, and grid infrastructure.
This diversified exposure provides resilience against cyclicality typical of the semiconductor industry. TI also maintains a substantial cost advantage through ownership of multiple 300mm fabs, which yield greater chip output at lower marginal cost than peers reliant on 200mm wafers or external foundries.
Despite recent declines in free cash flow and ROIC—largely due to front-loaded capital expenditures to expand internal manufacturing capacity—TI’s long-term efficiency remains industry-leading. As capital intensity normalizes post-2025, free cash flow per share is projected to rebound strongly, reaching up to $12 by 2026.
Given its exceptional historical capital efficiency, strategic market positioning, and mispricing driven by short-term pessimism, TI’s stock presents an attractive entry point. A DCF model supports a fair value of $208.56, making it a high-conviction buy.
Previously, we covered a bullish thesis on Texas Instruments (TXN) by The Wolf of Harcourt Street in January 2025, emphasizing its cyclical challenges, underwhelming Q1 guidance, and long-term positioning through advanced 300mm fabs and disciplined capital returns. The stock price has appreciated by roughly 8% since the coverage. Judah Kang echoes this optimism but focuses on TXN’s structural advantages—broad analog dominance, sticky automotive and industrial demand, and projected FCF recovery—arguing for mispricing amid temporary macro headwinds.
