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.