Texas Instruments slumps as chip demand keeps “hovering at the bottom”
The chipmaker beat on earnings, but like SK Hynix, investors are putting more weight on its less-than-stellar outlook than the recent past.
Texas Instruments is one of the worst-performing S&P 500 constituents in early trading as management warned that first-quarter profits would likely come in well below what Wall Street had penciled in.
The chipmaker, which people of a certain vintage most associate with the big graphing calculators we lugged around in high school, posted fourth-quarter results that beat analysts’ expectations on the top and bottom lines. But, like SK Hynix, investors are putting more weight on its less-than-stellar outlook than the recent past.
The divergence in demand for chips for AI (good) versus ex-AI (not good) that management teams across the industry have been highlighting for many quarters is ongoing, a trend underscored by Texas Instruments’ guidance.
The company, which has seen sales slip year on year for nine consecutive quarters, has testified to the prolonged period of seeing demand “hovering at the bottom” in its key markets.
“If I start with the industrial market, as I described, I think, during the last call, most of the sectors are kind of hovering at the bottom, maybe found the bottom,” President and CEO Haviv Ilan said on a conference call following the release of the results.
In the previous earnings call, Ilan said, “We are seeing — most of the sectors I would characterize are — have found the bottom, but are kind of hovering at that bottom.”
This persistent divide in demand within the industry speaks to a conundrum: AI is supposed to be sufficiently revolutionary so as to drive upgrade cycles across different end markets and lift all boats for demand. Instead, we’re seeing concentrated pockets of strength on the one hand and a U-shaped bottom in many key markets on the other, with the upward-sloping end of that letter a seemingly elusive hope.
(This point is a little less pertinent when it comes to Texas Instruments in particular, whose sales are more industrial and automotive centric than consumer electronics focused, but still holds for semis generally.)
The significant underperformance of Apple’s stock as of late can be viewed as an extension of this dynamic.
