Which factors influence the decline in the price of Texas Instruments shares and what to expect

Texas Instruments shares plunged nearly 12% in premarket trading on Wednesday after the company’s quarterly profit forecast showed a decline in demand for analog chips, fueling investor concerns about tariff-related disruptions.

The gloomy third-quarter profit forecast contrasts with the company’s earlier hopes for a strong recovery in chip demand, raising concerns about the impact of tariffs and eroding investor confidence.

Responding to analysts’ questions during a phone call after the results were released about whether the tariffs were prompting customers to withdraw orders and boosting revenue, TI Chief Executive Officer Haviv Ilan said he “cannot rule out that possibility.”

“(TI)’s tone has changed significantly from last quarter’s outlook as well as management’s comments for the quarter, appearing to be more cautious on the geopolitical and tariff environment,” said Bernstein analyst Stacy Rasgon, adding that the change “felt somewhat sudden.”

Chipmakers like TI have not yet been directly affected by Trump’s higher tariffs, but rising costs for chip-making tools and reduced spending by some customers are starting to have an impact.

This was evident in the broader semiconductor industry, with both ASML (AS:ASML), the largest supplier of chip manufacturing equipment globally, and TSMC, the world’s largest chip manufacturing factory, warning last week of uncertainty surrounding tariffs.

“The impact of tariffs/trade is starting to show and we expect a continuation of a slightly weaker than seasonal demand environment as the year progresses due to the impact of tariffs,” analysts at J.P. Morgan said.

Some analysts also raised concerns about pressure on TI’s margins due to the company’s increasing investments to expand its manufacturing footprint in the U.S. Following the results, at least six brokerages cut their price targets on the stock, while three raised them, according to data compiled by LSEG.

The company is up about 15%, while rival Analog Devices (NASDAQ:ADI) has gained about 11% year to date. TI has a trailing 12-month price-to-earnings ratio of 34.66, compared to Analog Devices’ 27.64.

What can we expect in the future?

Given the uncertainty surrounding geopolitical developments, trade agreements and tariff policy, Texas Instruments is likely to remain under pressure in the coming quarters. Analysts expect weak demand to continue at least through the end of the year, with volatility in customer orders remaining, particularly in Asia.

At the same time, long-term investments in expanding U.S. manufacturing could pay off strategically, especially if Washington continues to support local manufacturing through incentives like the CHIPS Act. However, demand recovery will depend on global economic conditions, the stabilization of supply chains, and the potential easing of trade tensions.

In the short term, investors will likely remain cautious, with the focus on the next few quarters’ reports and the company’s ability to maintain margins despite increased costs.