Join Us Wednesday, March 19

Question: How would you react if you held Texas Instruments stock (NASDAQ: TXN) and its value dropped by 30% or more in the coming months? While this scenario might seem drastic, it has happened before and could occur again. Texas Instruments stock has recently shown mixed performance—it has fallen about 4% year-to-date in 2025 while gaining roughly 6% over the past 12 months. In contrast, the S&P 500 has risen about 10% during the same period. Even though the broader semiconductor industry has improved somewhat, driven by a surge in demand for artificial intelligence chips and a modest recovery in the personal computer market, Texas Instruments has faced challenges in its key automotive and industrial segments. Moreover, the overall market is experiencing a significant sell-off, spurred by growing concerns over a U.S. recession following tariffs imposed by President Donald Trump on major trading partners. Since demand for Texas Instruments products is closely tied to the overall economy and industrial activity, the stock could see a sharp correction if a downturn occurs.

Here’s the point: The main takeaway is that during a downturn, Texas Instruments stock could suffer significant losses. Data from 2020 shows that TXN stock lost about 30% of its value in just a few quarters and experienced a peak-to-trough decline of roughly 22% during the 2022 financial crisis—performing a bit worse than the S&P 500. This raises the question: Could the stock fall as low as $125 if a similar situation unfolds? Naturally, individual stocks are generally more volatile than diversified portfolios. Therefore, if you are seeking growth with lower volatility, you might consider the High-Quality portfolio, which has outperformed the S&P 500 and generated returns of over 91% since its inception.

Why Is This Relevant Now?

Texas Instruments’ financial performance has been mixed in recent quarters. In the automotive sector, customers have been cutting down on inventory built up during pandemic-related supply chain issues. The industrial segment—which includes analog products such as amplifiers, power management devices, microcontrollers, and specialized processors—is also showing some weakness. Additionally, the communications equipment sector reduced purchases due to a slowdown in 5G network deployment, particularly in the U.S. Furthermore, Texas Instruments’ gross margins have come under pressure because of slightly higher production costs associated with reduced factory utilization. In 2024, gross margins were roughly 58%, down from about 62% the previous year.

President Donald Trump’s assertive tariff policies—including a 20% tariff on Chinese imports and 25% on imports from Canada and Mexico, along with stricter immigration restrictions—have raised concerns that inflation might return. All of this suggests that the U.S. economy could face significant challenges and even a recession – our analysis here on the macro picture. In fact, during an interview last week, the President did not rule out the possibility that new tariffs might trigger a recession. Given the heightened uncertainty from the Trump administration’s policies, these risks are especially critical. Moreover, the ongoing Ukraine–Russia war and global trade tensions further obscure the economic outlook. Tariffs drive up import costs, leading to higher prices, reduced disposable income, and weaker consumer spending. This could impact TXN, as the company’s product lineup is more dependent on macroeconomic factors than other parts of the semiconductor industry. For perspective, industrial and automotive chips—which are highly cyclical—account for over two-thirds of Texas Instruments’ revenue.

How Resilient Is TXN Stock During A Downturn?

TXN stock has experienced an impact that was slightly worse than the benchmark S&P 500 index during several recent downturns. Concerned about the effects of a market crash on TXN stock? Our dashboard How Low Can Texas Instruments Stock Go In A Market Crash? provides a detailed analysis of how the stock performed during and after previous market crashes.

Inflation Shock (2022)

• TXN stock declined 22.3% from a high of $191.01 on 29 March 2022 to $148.34 on 16 October 2022, compared to a peak-to-trough drop of 25.4% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 14 May 2024
• Subsequently, the stock rose to a high of $220.29 on 10 November 2024 and is currently trading at around $180

Covid Pandemic (2020)

• TXN stock dropped 29.8% from a high of $133.13 on 19 February 2020 to $93.50 on 16 March 2020, compared to a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 17 July 2020

Global Financial Crisis (2008)

• TXN stock declined 62.4% from a high of $36.59 on 9 October 2007 to $13.77 on 2 March 2009, compared to a peak-to-trough drop of 56.8% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 2 May 2013

Premium Valuation

At its current price of approximately $180 per share, TXN is trading at around 34x consensus 2025 earnings, which may appear somewhat expensive. Additionally, the company’s growth rates have been moderate. Revenues contracted in 2024 and are projected to grow in the high single digits for 2025. With rising recession risks, the outlook for TXN could become challenging.

Given this potential slowdown in growth and the broader economic uncertainties, ask yourself the question: do you plan to hold on to your Texas Instruments stock now, or will you panic and sell if it begins dropping to $150, $125, or even lower? Holding onto a declining stock is never easy. Trefis partners with Empirical Asset Management—a Boston area wealth manager—whose asset allocation strategies yielded positive returns during the 2008-09 period when the S&P lost more than 40%. Empirical has integrated the Trefis HQ Portfolio into its asset allocation framework to offer clients better returns and reduced risk compared to the benchmark index—a smoother ride, as demonstrated by the HQ Portfolio performance metrics.

Invest with Trefis

Market Beating Portfolios | Rules-Based Wealth

Read the full article here

Share.
Leave A Reply