Intel and Texas Instruments Stocks Are Downgraded Ahead of Earnings. There Are Multiple Challenges.

Intel stock was downgraded to Underperform from Neutral with a $34 price target at BofA Securities. (Photograph by David Silverman/Getty Images)

Key Points

• BofA Securities downgraded Intel to Underperform from Neutral, citing an inflated valuation and ongoing competitive challenges.
• BofA Securities also downgraded Texas Instruments to Underperform from Neutral due to global tariff turmoil and limited AI exposure.
• UBS maintained a Neutral rating on Intel and a Buy rating on Texas Instruments, despite trimming the latter’s price target.

Intel and Texas Instruments both caught a downgrade on Monday, just over a week before the semiconductor companies are set to report earnings.

In Intel’s case, the chip maker may be moving “too far, too fast,” BofA Securities wrote on Monday. The firm rates Intel at Underperform, down from Neutral, with a $34 price target. Shares were up 1.4% at $36.88 on Monday.

The firm believes Intel’s recent $80 million jump in market capitalization “more than reflects its improved balance sheet.” However, fundamentals are still challenged, and valuation inflated, against the backdrop of stiff competition.

Analysts noted that Intel has struggled to regain market share from competitors such as Advanced Micro Devices and Arm Holdings. Over the past few years, Intel has lost ground in both the personal-computer and server central processing unit markets, largely due to sub-par chips compared to similar offerings from AMD and Arm.

Beyond uncompetitive products, Intel’s competitive outlook is further complicated considering that the company lacks a discernible artificial-intelligence strategy. Intel lacks a so-called AI accelerator product, a piece of specialized hardware meant to speed up AI workloads.

The company has tried to develop or acquire new AI accelerator assets over the past few years, “but at this point the project seems to be either in a halt or no longer a focus area given the struggles in the existing CPU business as well,” analysts wrote.

The BofA team noted that Intel’s foundry “is certainly unsustainable on its own” without Intel Products as a customer. Through Intel Products, Intel serves as its own biggest customer: The Products division markets physical goods, while the foundry manufactures them.

Even in the best-case scenario, the outlook appears grim. Intel could land “substantial external customer revenue” along with its internal customer, but BofA still expects the business to be unprofitable by the end of calendar 2027.

The firm also downgraded Texas Instruments to Underperform from Neutral, cutting its price target to $190 from $208. The stock gained 1.2% to $173.90 in Monday trading.

While BofA appreciates the “high quality” of the company’s assets and its consistent execution, “we believe the turmoil caused by global tariffs could keep the lid on any near-/medium-term demand improvement in the industrial economy,” the firm wrote.

The chip maker falls short in other ways. Unlike peer Infineon Technologies, Texas Instruments “has limited exposure to the ongoing AI capex cycle” that has been a boon to other stocks, analysts continued.

BofA also finds cause for concern in Texas Instruments’ rich valuation. The stock is trading at 31 times 2026 enterprise value to free cash flow, well above close peer Analog Devices, even as Analog is expected to generate free cash flow margins between 35% and 40%, well above Texas Instruments’ 25% to 30% range.

UBS analysts also weighed in on the stocks Monday. The firm expects Intel to report results that are in line with or modestly above fourth-quarter guidance, “due mostly to recent improvements in the PC and server markets.”

Analysts conceded that Intel appeared to take “a rather conservative stance” in guiding for a below seasonal second half of 2025. UBS rates Intel at Neutral with a $40 price target.

The analysts were incrementally more bullish on Texas Instruments, maintaining a Buy rating even as they trimmed their price target on the shares to $245 from $255.

UBS expects third-quarter revenue to come in at $4.8 billion and fourth-quarter revenue to be guided down to the $4.5 billion to $4.6 billion range. Compared to the current Street consensus estimate of $4.5 billion, “this seems fine especially given the pervasive negativity among nearly every investor with whom we speak,” analysts wrote.

This negative sentiment could be partly due to China’s ongoing investigation into Texas Instruments’ business there, even though the company itself said it has yet to be notified of any probes, according to UBS.

Beyond the industrial end market, which has remained the company’s strongest, UBS sees “improving demand signals for nearly all end markets,” indicating that “things have been steadily improving following tariff uncertainty and defensive pull-ins.”

Crucially, a recent survey suggests that more companies that use chips are looking to buy from U.S.-based manufacturers, which could be a boon to Texas Instruments given its expansive domestic manufacturing footprint, the firm said.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com