Mackenzie Tatananni

Texas Instruments stock fell sharply on Friday, setting a new 52-week low and extending earlier losses. Macro uncertainty has battered shares of the semiconductor company.

The most recent declines came after the China Semiconductor Industry Association issued an emergency notice on methods for determining the origin of chip imports, a jarring sign of the mounting trade tensions between the U.S. and China.

The notice jolted Texas Instruments, which maintains a large presence in China. Shares tumbled 9.3% to $142.09 as the S&P 500 and tech-heavy Nasdaq Composite rose. Texas Instruments stock set an intraday low of $139.95, a level it last traded at in October 2023.

Shares of fellow storied chip maker Intel were down 6.5% on Friday.

On Thursday, Texas Instruments closed down 7.6%. The stock has fallen more than 20% since markets closed on April 2, when President Donald Trump unveiled a storm of retaliatory tariffs and a blanket tax of 10% on imports from every country. The president has since backed off those plans while doubling down on taxes on Chinese imports.

J.P. Morgan analysts wrote in a report on Monday that semiconductors currently face minimal direct tariff impact, as exports to the U.S. are exempt from reciprocal tariffs. That's not to say things won't change. In addition to latest news out of China, Trump hinted last week that levies on chip imports would be "starting very soon."

There are other risk factors, too. Most U.S.-designed chips are assembled, packaged, and tested overseas and shipped directly to equipment manufacturers in China. J.P. Morgan expects the real impact to come from increased end-product prices, as elevated prices for products that incorporate semiconductors may lead to demand destruction.

Outside of China, Texas Instruments faces persistent headwinds related to sluggish automotive demand and the reduction of inventory levels, analysts with KeyBanc Capital Markets noted.

The company makes analog and embedded semiconductors with applications in the industrial and auto markets. It differs in this way from Nvidia, which is the flag bearer for artificial intelligence as a maker of high-powered GPUs for data centers.

Texas Instruments was among the semi manufacturers to secure funding under the Chips Act. The company said in December that it had been awarded up to $1.6 billion to support chip-making operations in Texas and Utah.

Trump has repeatedly taken aim at the bipartisan legislation, suggesting in March that lawmakers eliminate it and use the proceeds to pay off debt. The president bragged last week that he had essentially strong-armed Taiwan Semiconductor Manufacturing, another Chips grant awardee, into building out its manufacturing operations in the U.S. without federal assistance.

"All I did is say, 'If you don't build your plant here, you are going to pay a big tax -- 25, maybe 50, maybe 75, maybe 100%,'" Trump said at an event, referring to the company's $100 billion investment to manufacture chips in the U.S.

It is difficult to anticipate where things will go from here. J.P. Morgan drew parallels to the 2018 U.S.-China trade war while noting that the impact of tariffs will be "arguably broader" this time around.

Escalating tensions in summer 2018 caused end market demand to deteriorate, with weaker chip demand beginning in the second half of the year and lasting into 2019, particularly in the industrial, automotive, and enterprise sectors.

J.P. Morgan pointed out that chip stocks rapidly discounted the expected slowdown in demand. Shares bottomed over a period of three to five months, and started to recover at the beginning of 2019, aided in part by expectations that the Federal Reserve would cut interest-rate cuts.

The firm expects chip makers to adopt a conservative outlook in the coming earnings season, with cuts to earnings-per-share estimates only helping the bottoming process. Similar to 2018, the chip-design software segment should be more defensive, while memory stocks exhibit greater volatile, J.P. Morgan analysts wrote.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com

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April 11, 2025 11:05 ET (15:05 GMT)

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