Morgan Stanley sends blunt message on Texas Instruments' surge

Texas Instruments has given investors a much cleaner recovery story, but Morgan Stanley is still not ready to fully buy into the rally. The Dallas-based chipmaker reported stronger first-quarter results, issued a better second-quarter outlook, and showed a sharp improvement in free cash flow after years of elevated spending on new manufacturing capacity.

That combination helped reset the near-term debate around Texas Instruments, which has been trying to prove that its long manufacturing investment cycle can eventually translate into stronger margins and cash generation. The stock jumped after the report, with Seeking Alpha reportingthat Texas Instruments rose sharply as data center revenue surged 90% year over year, lifting sentiment across analog semiconductor stocks.

Morgan Stanley stays cautious after the rally

Morgan Stanley's latest view stands out because it does not argue that Texas Instruments is failing to improve. Instead, the firm appears to be warning that the market may already be paying too much for that improvement after the stock's post-earnings move.

Morgan Stanley analyst Joseph Moore maintained an Underweight rating on Texas Instruments while raising the firm's price target to $221 from $180, according to analyst-rating summaries. That is an important distinction because the higher target acknowledges better fundamentals, while the Underweight rating still suggests caution on valuation and the risk-reward setup.

The first-quarter numbers were hard to ignore

Texas Instruments' first-quarter results gave bullish investors plenty of evidence to support the recovery argument. The company reported revenue of $4.83 billion, up 19% from a year earlier, while net income rose to $1.55 billion and earnings per share came in at $1.68.

The company's second-quarter outlook also came in stronger than Wall Street expected, which helped support the rally. Texas Instruments forecast revenue of $5 billion to $5.4 billion and earnings per share of $1.77 to $2.05, above analyst expectations cited by The Wall Street Journal.

Free cash flow is becoming the bigger story

The bigger story for Texas Instruments may not be the quarterly earnings beat, but the improvement in free cash flow. Barron's reported that capital expenditures dropped to $676 million after years of higher investment in manufacturing upgrades, helping free cash flow rebound to $1.4 billion from a $274 million loss a year earlier.

That matters because Texas Instruments has spent years building out internal manufacturing capacity, especially around more efficient 300-millimeter wafer production. If capital spending continues to ease while demand improves, the same investment cycle that pressured cash flow during the downturn could become one of the company's strongest arguments with investors.

The manufacturing strategy is backed by Washington

Texas Instruments' manufacturing buildout is also tied to a larger U.S. semiconductor policy push. The U.S. Commerce Department awarded the company up to $1.61 billion in direct CHIPS Act funding to support multiple semiconductor projects in Texas and Utah.

Texas Instruments said the funding will help support three new 300-millimeter wafer fabs under construction in Texas and Utah. The company has positioned those projects as part of a broader effort to build a more dependable supply of analog and embedded processing chips, which remain essential across industrial, automotive, consumer, and communications markets.

Silicon Labs adds another growth lever

Texas Instruments is also moving to expand its embedded processing and wireless connectivity business through a major acquisition. In February, the company agreed to buy Silicon Laboratories in a $7.5 billion deal, with Reuters reporting that the transaction would strengthen TI's position in wireless connectivity chips used across industrial and consumer applications.

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The deal gives investors another reason to believe Texas Instruments is trying to broaden its long-term growth profile beyond the cyclical rebound in analog chips. TI expects about $450 million in annual cost savings within three years of closing, though the deal is not expected to close until the first half of 2027.

The stock now has to justify the optimism

For bulls, the argument is straightforward: Texas Instruments is coming out of an analog-chip downturn, data center demand is improving, free cash flow is rebounding, and the company's manufacturing strategy is beginning to look less like a burden. That is the kind of setup investors usually reward when earnings estimates are moving higher, and capital spending starts to normalize.

Morgan Stanley's caution points to the other side of the trade, where better fundamentals do not automatically make the stock attractive after a large move. Texas Instruments still needs to show that the recovery can last, that free cash flow can keep improving without relying too heavily on one-time incentives, and that the Silicon Labs deal can add value without creating new execution risk.

Related: Texas Instruments makes a $7.5B deal no one saw coming

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This story was originally published April 28, 2026 at 8:03 AM.