Texas Instruments Shares Jump 7% on Strong AI Data Center Demand Outlook

Texas Instruments (NASDAQ:TXN | TXN Price Prediction) shares surged 5% in after-hours trading yesterday following guidance that caught the market off guard, and continue up 7% in this morning’s pre-market.

The company projected first-quarter 2026 revenue of $4.32 billion to $4.68 billion, with a midpoint of $4.50 billion that exceeds both Wall Street’s $4.42 billion consensus and the company’s own fourth-quarter 2025 revenue of $4.42 billion.

That sequential growth matters because it hasn’t happened in 16 years. Management specifically cited “data centers and industrial recovery” as the drivers, signaling that customers have finally cleared inventory backlogs that plagued the semiconductor industry through 2023 and 2024.

The AI Infrastructure Play

Texas Instruments isn’t building GPUs, but it’s capturing a different piece of the AI buildout. Data centers need analog chips for power management, signal processing, and thermal control across every rack of servers. As hyperscalers expand capacity to support AI workloads, TI’s analog portfolio becomes infrastructure.

The company’s analog division posted 14% year-over-year revenue growth in 2025, and gross margins held at 57.4% in the third quarter despite two years of industry-wide pressure. Operating margins stabilized at 35%, a sign that pricing power is returning as supply-demand dynamics normalize.

Valuation and Positioning

The stock trades at 36x trailing earnings and 29x forward earnings, pricing in the recovery. Analysts maintain a $195 average price target with mixed sentiment: 14 rate it a buy, but 17 remain neutral. The forward multiple compression suggests Wall Street expects earnings to accelerate, but you’re paying for that growth today.

If AI infrastructure spending sustains through 2026 and industrial markets follow through on the recovery, TI’s guidance could mark an inflection point. The company returns capital aggressively with a 2.8% dividend yield, but watch whether Q1 results validate the outlook or whether this was a one-quarter inventory restocking cycle dressed up as structural demand.