The Bull Case For Texas Instruments (TXN) Could Change Following New Sherman Fab Ramp-Up Plan – Learn Why

• Texas Instruments has begun production at its new 300mm semiconductor wafer fabrication plant in Sherman, Texas, a key step in its multi-fab US manufacturing build-out to supply industrial, automotive, medical and data center customers.
• This expansion, part of a broader plan to invest up to US$60.00 billion in connected fabs, is sparking debate over how much near-term margin pressure is acceptable to secure long-term supply control and customer reliability.
• Now we’ll explore how ramping the Sherman fab, with its heavy upfront capital demands, reshapes Texas Instruments’ investment narrative and risk profile.

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Texas Instruments Investment Narrative Recap

To own Texas Instruments, you need to believe that demand for its analog and embedded chips in industrial and automotive markets will justify heavy US$60.00 billion fab investments, despite nearer term margin pressure. The Sherman ramp directly affects the biggest short term swing factor: how quickly margins and free cash flow recover from higher capex and potential underutilization, at a time when softer demand and litigation headlines are already in focus.

Among recent developments, the most relevant here is the double downgrade tied to concerns that TI’s margin and earnings recovery could lag peers as Sherman ramps. That bearish view sits alongside past revenue declines from customer order delays, and frames Sherman as a real test of whether added U.S. capacity ultimately offsets risks of underutilized fabs, higher depreciation and restrained free cash generation.

But while the Sherman fab may reinforce TI’s supply strength, investors should also be aware of the risk that rising capital intensity and potential overcapacity could...

Read the full narrative on Texas Instruments (it's free!)

Texas Instruments' narrative projects $22.3 billion revenue and $7.9 billion earnings by 2028.

Uncover how Texas Instruments' forecasts yield a $188.92 fair value, a 7% upside to its current price.

Exploring Other Perspectives

Some of the lowest ranked analysts took a far more cautious view, assuming only about 6.5% annual revenue growth and earnings of roughly US$5.9 billion before Sherman, so you should expect that their concerns about rising capex, oversupply and thinner margins might evolve quite differently from more optimistic takes as this new capacity comes online.

Explore 10 other fair value estimates on Texas Instruments - why the stock might be worth 29% less than the current price!

Build Your Own Texas Instruments Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Texas Instruments research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.
• Our free Texas Instruments research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Texas Instruments' overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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