AI Data Center Growth Accelerates but Broader Recovery Still in Question

What happened

Texas Instruments' data center business jumped nearly 90% YoY, reinforcing the AI infrastructure tailwind that the DeepValue report already highlighted in Q1'26. However, data center remains only ~9% of revenue, and the core thesis hinges on whether industrial reorders sustain beyond a restock burst. The Q2'26 guidance of $5.0B–$5.4B is the critical checkpoint; a print near the high end would validate the recovery narrative. At ~$270 with a P/E over 45, the stock prices in a durable upturn with limited margin for error. Until Q2 results confirm industrial momentum, the AI growth alone does not warrant an upgrade from WAIT.

Implication

If data center continues to grow at these rates and industrial recovery broadens, TXN could re-rate higher as the cyclical upturn proves durable. However, the current valuation leaves little room for error, and any signs of a restock fade or tariff disruption could lead to sharp multiple compression. Long-term investors may find better entry points near $230 (attractive entry per report).

Thesis delta

The AI data center tailwind is stronger than previously assumed, with ~90% YoY growth. However, this does not yet alter our WAIT rating because data center remains a small share of revenue, and the broader industrial recovery—which is three times larger—must sustain for the thesis to work. The key variable remains Q2'26 industrial order trends, not just data center momentum.