Texas Instruments Stock Slips. It Caught a Rare Downgrade From Goldman Sachs.

Texas Instruments stock is down 4.3% this year as of Friday’s close. (Dreamstime)

Key Points

• Goldman Sachs downgraded Texas Instruments stock to Sell from Buy, cutting its price target to $156 from $200.
• Texas Instruments’ strategy of building excess chip-making capacity may hinder its recovery in the analog semiconductor industry.
• Goldman Sachs upgraded Teradyne stock to Buy from Sell, raising its price target to $230 from $148, citing its AI chip exposure.

Texas Instruments is the world’s largest player in analog semiconductors, but its stock may get left behind even as the industry rallies, analysts at Goldman Sachs said.

The investment bank issued a rare double downgrade for Texas Instruments shares Monday, dropping its rating for the stock all the way to Sell from Buy in a research note. The firm also slashed its price target for shares to $156 from $200.

Texas Instruments shares slipped 0.5% to $178.50 on Monday. The stock was down 4.3% this year as of Friday’s close.

The analog semiconductor industry—which makes chips that process inputs such as sound and light—is in the early stages of a cyclical recovery, Goldman Sachs said. But Texas Instrument’s supply-chain choices over the last few years may hamper its ability to keep pace with competitors.

Texas Instruments built too much chip making capacity and kept its utilization of these facilities too high in the past few years, even as demand declined from a pandemic-era spike, Goldman Sachs said. That strategy meant significant upfront costs and, now, depreciating assets.

“Inventory on the balance sheet is at record levels, and the company has only recently begun to pull back factory loadings,” the analysts wrote.

Texas Instruments didn’t immediately respond to Barron’s request for comment. On an October conference call following the company’s quarterly earnings report, chief financial officer Rafael R. Lizardi said he was very pleased with the company’s current inventory, which helped keep customer lead times short.

The company forecast $2.3 billion to $2.7 billion in depreciation costs for fiscal 2026.

Goldman Sachs expects the industry upturn to be gradual. That slower pace of recovery favors competitors with leaner inventories that don’t have significant depreciation costs weighing on profits, the firm said. Texas Instruments will still enjoy a boost in revenue, the analysts argued, but its “earnings estimate revisions will meaningfully lag peers.”

One of those peers could be Teradyne. Goldman Sachs double-upgraded Teradyne stock to Buy from Sell and lifted its price target to $230 from $148 in the same research note.

Teradyne has a semiconductor test business with exposure to artificial-intelligence chips, which will allow it to offset weaknesses in other parts of the business, Goldman Sachs said. A win in this segment, which isn’t yet baked into the company’s guidance, would give Teradyne access to a massive new addressable market.

“We view Teradyne’s strategic pivot toward AI compute, away from its prior Mobile focus, as a key driver of medium- and long-term growth,” the analysts wrote.

Teradyne stock was up 1.8% to $196.82 on Monday. Shares have soared 54% this year as of Friday’s close in part due to strong AI-related test demand.

Write to Nate Wolf at nate.wolf@barrons.com