Stock Markets April 9, 2026 08:28 AM

Stifel Elevates Texas Instruments to Buy, Cites Free Cash Flow Turnaround as Capex Eases

Analysts forecast falling capital intensity, CHIPS Act benefits and Silicon Labs deal to boost FCF and margins over coming years

By Nina Shah TXN SLAB
Stifel Elevates Texas Instruments to Buy, Cites Free Cash Flow Turnaround as Capex Eases
TXN SLAB

Stifel upgraded Texas Instruments to Buy from Hold and raised its price target to $250, citing an expected inflection in free cash flow as the company exits a multiyear elevated capital expenditure cycle. The brokerage highlights declining gross capex, CHIPS Act incentives, the pending Silicon Laboratories acquisition and expanding 300mm domestic capacity as drivers for improved FCF, margin expansion and stronger data center exposure.

Key Points

  • Stifel upgraded Texas Instruments to Buy from Hold and raised its price target to $250, implying roughly 20% upside.
  • The brokerage projects gross capex falling from $2.39B in 2026 to $2.20B in 2027 and FCF per share rising from $8.13 (2026) to $9.60 (2027) and $10.61 (2028).
  • CHIPS Act incentives and the pending Silicon Laboratories acquisition are expected to support FCF, margin gains, and revenue synergies; data center revenue is projected to grow from about 9% to 20% of sales by 2029 at a 35% CAGR.

Overview

Stifel raised its recommendation on Texas Instruments to Buy from Hold and increased its price target to $250 from $215, arguing that the semiconductor company is approaching an inflection in free cash flow (FCF) generation as a long period of heavy capital spending winds down. The new target implies roughly 20% upside versus the most recent closing price. Shares rose 1.6% in premarket trading by 08:33 ET.


Stifel's investment case

Analysts led by Tore Svanberg contend that Texas Instruments is well positioned to regain share in the next analog cycle and to restore robust FCF after six years of elevated capital expenditures that have weighed on profitability and returns. The firm's thesis centers on a normalization of capital intensity and an associated rebound in cash generation per share.

Capex and FCF projections

Stifel's base-case forecast anticipates gross capital expenditures declining from $2.39 billion in 2026 to $2.20 billion in 2027. Using those assumptions, the firm models FCF per share increasing from $8.13 in 2026 to $9.60 in 2027 and $10.61 in 2028. Those projected gains form the backbone of the upgrade and higher price target.

Policy support

The analysts also point to CHIPS Act incentives as an incremental tailwind. Specifically, they cite an investment tax credit that recently rose to 35% under the One Big Beautiful Bill Act, and they project total CHIPS Act benefits for the company of $1.55 billion in 2026.

Impact of the Silicon Laboratories acquisition

Stifel highlighted TXN's pending acquisition of Silicon Laboratories as a meaningful contributor to earnings over time. The firm projects the deal could deliver more than 10% EPS accretion by 2030, driven by revenue synergies from integrating SLAB's wireless connectivity products into Texas Instruments' industrial and automotive channels and by manufacturing savings from moving SLAB production into TXN's internal 300mm fabs.

Data center opportunity and supply constraints

Data center exposure is another avenue for growth in Stifel's model. Currently representing roughly 9% of sales, data center revenue is projected to reach 20% of total sales by 2029 under the base case, expanding at a 35% compound annual growth rate. The analysts compared the situation to component shortages that curtailed system shipments in early 2026 and argued that power management chips are emerging as a similar bottleneck for large-scale AI infrastructure rollouts. They noted that Texas Instruments' expanded domestic capacity is positioned to help address that gap.

"TXN is addressing this supply concern through its 300mm domestic capacity expansion, which provides a dependable source of foundational analog and power management chips," the analysts wrote.

Manufacturing transition and margin dynamics

On production, Stifel expects a shift to 300mm wafers to be a long-term structural benefit. The transition targets more than 80% of revenue on the 300mm process by 2030 and is modeled to eventually deliver up to 800 basis points of gross margin accretion. However, the firm warns that near-term depreciation pressure will likely offset those gains through 2026 before the dynamic reverses starting in 2027.

Valuation scenarios

Alongside the $250 base-case target, Stifel published a bull-case price target of $286, contingent on quicker end-market demand and faster penetration into data center applications.


Conclusion

Stifel's upgrade of Texas Instruments to Buy reflects a coordinated set of assumptions: falling capital intensity, government incentives, strategic M&A, and capacity expansion into 300mm manufacturing. Those factors combine in the firm's models to drive higher free cash flow, margin improvement and an expanded addressable market in data centers, subject to the timing of demand recovery and execution on capacity and integration plans.

Risks

  • Near-term depreciation pressure tied to the 300mm transition may offset gross margin improvements through 2026 - this impacts semiconductor manufacturing and capital-intensive hardware sectors.
  • Realization of projected synergies and EPS accretion from the Silicon Laboratories acquisition depends on successful integration and conversion of manufacturing to TXN's 300mm fabs - this affects industrial and automotive end-market exposure.
  • Faster-than-expected end-market demand or slower data center penetration would alter Stifel's bull and base-case outcomes, introducing uncertainty in semiconductor revenue mix and valuation.

More from Stock Markets

Semiconductor Lead Times Climb Further Across Multiple Product Lines, Baird Says Apr 9, 2026 BofA Sees Momentum in U.S. Power & Utilities After Management Meetings; Buys Remain for Select Names Apr 9, 2026 Raymond James Sees Instacart Momentum After Cart Assistant Rollout Apr 9, 2026 Starbucks Appoints Former Chipotle Development Chief to Lead Coffeehouse Design and Growth Push Apr 9, 2026 Gulf Stocks Slip as Questions Grow Over Regional Truce Apr 9, 2026