TXN vs. ADI: Which Stock Has an Edge in the Analog Signal Processing?

Core Insights - Texas Instruments (TXN) and Analog Devices (ADI) are major players in the analog signal processing semiconductor market, focusing on industrial, automotive, and consumer electronics applications [1][2] Texas Instruments Overview - TXN's analog segment experienced a year-over-year growth of 17.9%, reaching $3.45 billion in Q2 2025, driven by recovery in various end markets [3] - The company is prioritizing internal chip manufacturing, aiming to produce over 95% of its wafers in-house by 2030, which will enhance control over production, quality, and costs [4][5] - TXN has received up to $1.6 billion in CHIPS Act funding, with total benefits expected to be between $7.5 billion and $9.5 billion over its lifetime [5] - Geopolitical risks, particularly in China, pose a challenge, as China accounted for approximately 20% of TXN's 2024 revenues [6] - The automotive segment is recovering slowly, with revenue growth estimates of 12.9% for 2025 and 8.8% for 2026, while EPS is expected to improve by 7.7% in 2025 and 14.8% in 2026 [7][8] Analog Devices Overview - ADI reported a 22% revenue growth in Q2 fiscal 2025, reaching $2.64 billion, supported by demand in electric vehicles, industrial sectors, and data centers [9][13] - The automotive segment, making up 32% of ADI's revenues, benefits from increased semiconductor content in electric vehicles and advanced driver assistance systems [11] - The industrial segment, accounting for 44% of revenues, is showing strong recovery, expected to be the fastest-growing market [11] - ADI's communications business, comprising 12% of total revenues, is gaining from investments in AI-driven data centers [12] - Revenue growth estimates for ADI are 12.2% for fiscal 2025 and 10% for fiscal 2026, with EPS expected to grow by 16% in 2025 and 19% in 2026 [13][14] Comparative Analysis - Year-to-date, TXN shares have increased by 6.8%, while ADI shares have risen by 16.4% [15] - In terms of valuation, TXN has a forward P/S multiple of 9.79X, which is lower than ADI's 10.63X [17] Conclusion - ADI is currently viewed as a more favorable investment compared to TXN, which is facing several near-term challenges [18]