Texas Instruments Falls On Fear Demand For Chips Is Peaking

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Investing.com – Texas Instruments (NASDAQ:TXN) stock slipped more than 4% in Thursday’s premarket trading amid concerns that demand for silicon chips is peaking.

The company said on Wednesday it expected sales to stagnate or decline a little in the current quarter, and management was evasive when asked on an earnings call if it thought its recent strong growth is susainable. 

The chipmaker expects sales in the September quarter to come between $4.4 billion and $4.76 billion. Earnings per share is likely to be $1.87 to $2.13, the company said Wednesday while announcing its second-quarter results.

According to a poll by Bloomberg, analysts predicted profit of $1.97 a share and sales of $4.59 billion.

Bloomberg said the company’s management sidestepped repeated attempts by analysts to get its view on whether chip demand is peaking.

“Our job isn’t to predict the future, it’s to prepare the company so we can handle anything and we’ve done that,” Chief Financial Officer Rafael Lizardi told the wire service.

Texas, like other chipmakers, benefitted immensely from the emergence of work-from-home phenomenon that the pandemic forced on the people. Demand for mobiles, laptops, printers and several other digital gadgets boomed, and along with that, the demand for chips that go into them.

As offices open and a more blended form of home-office work takes over, many believe peak demand may be behind or nearing and thus the best of times for chipmakers like Texas Instruments may be over.

According to data from Susquehanna Research, it may be too early to say that though. The data shows that delivery lead times for chips are still growing.

Texas second-quarter revenue rose 41% year-on-year to $4.58 billion and EPS rose 39% to $2.05.

Demand from industrial, automotive and personal electronics industries was strong, driving revenue growth of 42% and 43% respectively in its two key businesses of analog and embedded processing chips.