ADI vs. TXN: Which Semiconductor Stock Has an Edge Now?

Core Insights - The semiconductor industry is experiencing a boom, raising questions about the upside potential of Analog Devices (ADI) and Texas Instruments (TXN) stocks [1] Group 1: ADI Stock Analysis - ADI is well-positioned in high-performance analog systems, with significant growth in its industrial (22.9%), automotive (22.4%), communications (40.5%), and consumer (21.3%) segments in Q3 of fiscal 2025 [2][9] - The industrial segment is benefiting from demand in instrumentation, automation, healthcare, aerospace, defense, and energy management, with expectations for the automation business to double by 2030 [3] - The communications segment is gaining traction from 5G, satellite, and broadband technologies, while the consumer segment is seeing growth in handsets, gaming, and wearables [4] - ADI's automotive segment is expanding due to advancements in Advanced Driver Assistance Systems (ADAS) and power management, contributing to improved operating margins [5] - The Zacks Consensus Estimate predicts ADI's fiscal 2025 and 2026 margins to grow by 21.5% and 18.5%, respectively, with earnings estimates for fiscal 2025 remaining stable and a downward revision for 2026 [6] Group 2: TXN Stock Analysis - Texas Instruments' analog segment grew by 16% year-over-year to $3.73 billion in Q3 of 2025, driven by recovery in industrial and personal electronics markets [10] - TXN is focusing on internal chip manufacturing to maintain its market position, aiming to produce over 95% of its wafers internally by 2030, supported by $1.6 billion in CHIPS Act funding [11][12] - However, TXN faces geopolitical risks, particularly with 20% of its 2024 revenues coming from China, which may be impacted by rising tensions and trade restrictions [13] - The automotive segment's slow recovery could hinder TXN's overall growth, with Zacks estimates indicating revenue growth of 13% for 2025 and 6.7% for 2026, alongside EPS growth of 5% and 9.3% for the same years [14] Group 3: Comparative Performance and Valuation - Year-to-date, TXN shares have declined by 14%, while ADI shares have increased by 12.7% [17] - In terms of valuation, ADI trades at a forward 12-month P/S multiple of 9.56X, significantly higher than TXN's 7.81X [18] - ADI is currently rated as a Zacks Rank 3 (Hold), while TXN holds a Zacks Rank 4 (Sell), indicating a more favorable investment outlook for ADI [20]