Texas Instruments' data center business is expected to surge by 50%. The "bull market baton" for chip stocks has finally passed to analog chips?

According to Zhitong Finance APP, Haviv Ilan, President and CEO of Texas Instruments (TXN.US), a giant in the field of analog chips and embedded processing solutions, recently stated that the company's data center business is helping to drive the overall demand for its analog chip products towards a recovery phase. Since the beginning of this year, most popular chip stocks globally have repeatedly hit historical highs, especially those closely related to AI computing infrastructure—such as Nvidia, Broadcom, and TSMC, which have seen the strongest gains. Analog chip leaders like Texas Instruments, Infineon, STMicroelectronics, and NXP have largely missed this wave of growth. However, with the rapid advancement of data center construction, analog chips are expected to lead the entire chip stock market.

"The communications business is indeed recovering. However, the business related to data centers may be the fastest recovering market. We are about to see approximately 50% very strong growth here, and it is almost reaching new demand peaks. So it is returning to peak levels around 2022," Ilan stated at the Communacopia + Technology conference hosted by Wall Street financial giant Goldman Sachs.

Ilan pointed out that data centers are the fastest-growing market for the company's analog chips and are driving Texas Instruments' performance towards a strong recovery cycle. Texas Instruments has the broadest customer base and the largest product range among chip manufacturers, so the company's performance and outlook data can serve as one of the predictive indicators for demand across various industries.

Texas Instruments is the world's largest manufacturer of analog chips and MCU chips, whose products perform simple yet crucial functions and are widely applied globally, such as converting power to different voltages in electronic devices.

"This will be our fastest-growing market this year, and I see more and more opportunities for the company to participate in larger-scale competitions. And this operating rate is not low, probably between $1 billion and $1.2 billion. This is the strong level I expect us to reach by the end of 2025, and I see huge growth opportunities for Texas Instruments in the data center business," Ilan added.

The large-scale expansion of AI data centers drives the long-dormant analog chips towards recovery

Like other large chip manufacturers, Texas Instruments is eager to benefit from the unprecedented wave of new construction and expansion of AI data centers, which are essential infrastructures for the exponentially growing global AI computing resources.

CEO Ilan pointed out that Texas Instruments currently derives only a low single-digit percentage of its revenue from the data center market, but "in my view, the vast growth potential will make it 20% of our market, given the rapid growth in demand for analog chips, that day is not far from now," Ilan stated in an interview.

The AI computing demand driven by generative AI applications and AI agents at the inference end can be described as "a sea of stars," expected to continuously drive the AI computing infrastructure market to exhibit exponential growth. The "AI inference system" is also considered by Jensen Huang to be the largest source of Nvidia's future revenue According to Wall Street investment giants Loop Capital and Wedbush, the global investment wave in artificial intelligence infrastructure centered around AI computing hardware is far from over and is only just beginning. Driven by an unprecedented "AI computing demand storm," this round of AI investment is expected to reach a scale of up to $2 trillion.

AI data centers are arguably the most critical large-scale infrastructure projects of the AI era, essential for the efficient operation of generative AI applications like ChatGPT and the iterative updates of AI large models such as the GPT series. For analog chip leader Texas Instruments, the unprecedented scale of AI data center expansions and new constructions initiated by tech giants like Microsoft, Google, Meta, and Amazon will catalyze a strong recovery cycle for analog chips, which have been on a long-term decline since the end of 2022.

Analog chips are considered the irreplaceable "water, electricity, and coal" of AI data centers. Under the common drive for "higher power density, larger current, faster links, and stronger observability" in AI data centers, Texas Instruments' signature power management (GaN, hot-swappable/OR-ing/eFuse, multi-phase/PoL/Smart Power Stage), high-speed interconnect signal chains (PCIe 5.0 Redriver, ultra-low jitter clocks), and monitoring isolation (INA/UCD/TMP/ISO/AMC/UCC) will be the most direct and flexible beneficiary product lines.

In particular, the massive AI training/inference workloads push PSU and bus power to new levels, such as the 54V architecture with higher transient ratios, significantly enhancing the value and demand for Texas Instruments' GaN front-end, hot-swappable, OR-ing, eFuse, and isolation measurement product lines. Additionally, the steep transient of board-level Vcore current will drive Texas Instruments' multi-phase control + Smart Power Stage and high-current PoL to expand massively in sync with the "GPU/accelerator card power consumption curve."

The Road to Recovery for Analog Chips is Gaining Momentum

The latest semiconductor industry outlook released by the World Semiconductor Trade Statistics (WSTS) organization indicates that global chip demand recovery is expected to continue from 2025 to 2026. Moreover, the analog chips, which have been experiencing sustained weakness since the end of 2022, are poised to enter a strong recovery curve.

WSTS predicts that after a strong rebound in 2024, the global semiconductor market will grow by 11.2% in 2025, reaching a total value of $700.9 billion, primarily benefiting from the sustained strong momentum in the GPU-dominated logic chip sector and the HBM-dominated memory sector. Both sectors are expected to achieve robust double-digit growth, driven by the ongoing strong demand in artificial intelligence inference systems, cloud computing infrastructure, and cutting-edge consumer electronics.

WSTS predicts that the global semiconductor market will grow by 8.5% to reach USD 760.7 billion by 2026, building on a strong recovery in 2025. The agency expects growth to be widespread across various regions and a broad range of chip product categories, including analog chips and MCUs. Among them, memory chips are expected to lead the growth again, while logic and analog chips will also make significant contributions, with analog chips likely entering a strong recovery cycle.

A research report released by international banking giant UBS indicates that based on its Evidence Lab's monitoring of inventory and pricing data from over 100 global distributors, the current trends in inventory and pricing in the semiconductor industry are overall positive, especially as the continued digestion of MCU and analog chip inventories alleviates market concerns about supply-demand imbalances