We recently published a list of Analysts are Recommending These 10 AI Stocks. Since Texas Instruments Inc (NASDAQ:TXN) ranks 10th on the list, it deserves a deeper look.
The past several months of market activity and tech innovation has proved that the AI trends that started with the launch of ChatGPT are here to stay and all of this was not something that’d fizzle out after making headlines for some time. Companies are investing billions in AI and they expect to see the results of their investments in the coming months and years. Analysts at UBS said in a report earlier this year that if the launch of ChatGPT was the “iPhone moment” for the AI industry, apps like Copilot signify the “App Store moment.”
UBS also increased its revenue estimates for the AI industry in the report by 40%. The firm said at the time that it now expects revenue in the AI industry to increase from $28 billion in 2022 to $420 billion in 2027. This would represent a CAGR of over 70%.
UBS justified its growth projections by drawing an analogy from the past growth cycles of mainframes, smartphones and PCs.
“Annual shipments for mainframes were only about 1mn units until the 1980s, when they ballooned to around 10mn as microcomputers became mainstream computing devices. This was followed by a sharp increase during the PC era, when annual PC shipments shot up to more than 100mn units, with PC shipments eventually reaching an annual run-rate of nearly 300mn. Smart devices, which include smartphones and tablet PCs, crossed 1bn shipments during the mid2010s. Currently, annual shipments are close to 1.5bn units. With AI, we expect this 10x growth trend to continue, with annual AI chatbots and applications potentially crossing 10bn units.”
For this article we took a look at the latest analyst rating actions around AI stocks and picked the 10 most important AI companies that recently received positive comments or ratings from notable Wall Street analysts. With each stock we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Texas Instruments Inc (NASDAQ:TXN)
Number of Hedge Fund Investors: 50
Citi Research recently upgraded Texas Instruments Inc (NASDAQ:TXN) to Buy, pointing to the company’s lowering of capital expenditure and margins bottoming.
Recently, Texas Instruments in a capital management call revised its 2026 capital expenditure forecast, lowering the range to $2 billion to $5 billion from a previous $5 billion estimate. Texas Instruments Inc (NASDAQ:TXN) also suggested that gross margins might be nearing their lowest point.
Citi increased its price target on the stock to $235 from $200 and adjusted its earnings forecasts. The bank now expects EPS for 2025 to be $5.98, up from $5.81, and for 2026 to rise to $6.59 from $6.41, reflecting anticipated improvements in gross margins.
Citi said Texas Instruments Inc (NASDAQ:TXN) has indicated that its capital expenditures will be at the lower end of the range unless it achieves a 30% increase in revenue. The company projects that 2026 gross margins will exceed the 2024 level of 57.8% by at least 5%.
Analysts at Citi said Texas Instruments’ stock has historically traded at a 20% to 30% premium compared to its peers.
The London Company Large Cap Strategy stated the following regarding Texas Instruments Incorporated (NASDAQ:TXN) in its Q2 2024 investor letter:
“Texas Instruments Incorporated (NASDAQ:TXN) – TXN rallied in 2Q despite declining revenue in its latest update. TXN is beginning to see some encouraging signs of destocking nearing an end and some sub segments of the market are experiencing improving demand. TXN continued to spend on capex and should begin to see positive benefits to cash flow next year from the CHIPS Act.”
Overall, Texas Instruments Inc (NASDAQ:TXN) ranks 10th on Insider Monkey’s list titled Analysts are Recommending These 10 AI Stocks. While we acknowledge the potential of Texas Instruments Inc (NASDAQ:TXN), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TXN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.