TXN: Strong Q1, But Valuation and Tariff Risks Keep Us on the Sidelines

What happened

Texas Instruments delivered a strong Q1 2026, with industrial revenue up 30% YoY and data center surging 90% YoY, reinforcing a broad-based recovery narrative. However, at $269.5, the stock trades at a steep 45.6x P/E and 31x EV/EBITDA, already pricing in sustained margin expansion and growth. Management itself cautioned about a prior 'head fake' in industrial, and the DeepValue report emphasizes that Q2 2026 revenue must land within the $5.0B-$5.4B guided range and inventory days must drop below 200 to validate durability. Tariff exposure is a critical risk: ~50% of 2025 revenue is shipped into China, creating potential for pull-ins followed by air pockets. The bullish article is optimistic, but the deep value analysis keeps a WAIT rating, recommending entry near $230 for a better risk/reward profile.

Implication

If Q2 confirms sustained growth and margin expansion, TXN's structural cost advantage and data center tailwind support a multi-year recovery. Initiate on pullbacks below $230.

Thesis delta

The bullish Q1 data confirms near-term momentum, but the core thesis remains unchanged: execution risk is high at current valuations. The primary shift is increased confidence in data center as an incremental driver, but until Q2 proves industrial demand is durable, we maintain a cautious stance.