© Texas Instruments / Wikimedia Commons
It can pay big dividends (sometimes literally) to stash a few of the hedge fund favorites on your buy watchlist. Of course, it’s never a good idea to simply copy a name by riding the coattails of your favorite smart money managers, especially if you don’t even know how the business behind the stock makes money (or plans to eventually make big money in the distant future). In any case, this piece will look into a legacy tech company that’s profitable, but rather uneventful over the past couple of years.
What makes the name interesting is its timeliness, with shares now flirting with all-time highs and a rather stubborn ceiling of resistance near the $220-225 per-share mark. Indeed, Texas Instruments (NASDAQ:TXN) isn’t exactly the most exciting semiconductor play in the world, especially with the choppiness and wide consolidation channel the name has been stuck in over the past five years or so. In the last five years, the name has been up just over 16%.
The name has been effectively left behind as the semi industry rocketed higher with the AI tailwind at its back. While Texas Instruments and its dominant position in analog chips and embedded processors might be less exhilarating than GPUs, AI ASICs, fabs, or even the semi equipment makers, I would argue that the name is intriguing because it, too, has a ticket to the AI revolution. It might be showing up a bit late to the party, but, nonetheless, it’s poised to show up.
The Nvidia collab might still be underestimated
In recent years, the firm has been spending a lot on advancing its innovations, and even the great Nvidia (NASDAQ:NVDA | NVDA Price Prediction) has taken notice, with a partnership in place for work on physical AI.
As robotics begins to pick up traction, it’s Texas Instruments that could suddenly become the hot play that most investors have completely forgotten about. What’s most interesting is that the firm doesn’t need to depend on a third-party manufacturer.
Of course, investing in factories has cost big money and has caused many investors to shy away from the stock. As the firm spends less on such builds while looking to team up with physical AI firms, like Nvidia, I do think that more good days might be ahead of a firm with shares that may still not have enough of the AI tailwind priced in. As to whether Texas Instruments rises to become the next great AI infrastructure play remains the big question.
The case for a breakout moment
For now, there’s uncertainty as to when the rise of robotics and demand for Texas Instruments’ chips will move the needle. There might be some risk in getting in early, but given the trajectory of capital expenditures and the potential for a cyclical upswing, I certainly wouldn’t count the name out, especially as sensors look to become a new bottleneck for the age of humanoid robotics.
Looking to Wall Street, many sell-side analysts see new highs ahead, with price targets ranging from $250.00-270.00 or so on the high end. From a technical perspective, the stock looks like a must-watch for the coming week or so. With the hardest part of the factory buildout in the rearview and a potential robotics revolution ahead, the stage certainly looks set for a sales growth spurt and a bit of margin expansion.
At 33.4 times forward price-to-earnings (P/E), shares don’t seem cheap, but when you weigh the favorable path forward and the potential for the firm’s first big step into the AI boom, I’d argue the shares are far cheaper than they look. Perhaps it’s no mystery as to why several hedge funds (too many to name) scooped up shares in the fourth quarter: the name’s underappreciated, and there are fundamental as well as technical catalysts that loom.