While there isn’t any business-specific news dragging Intel’s stock lower today, Texas Instruments‘ (TXN -3.49%) recently published third-quarter results are spurring sell-offs for multiple chip companies. In addition to missing Wall Street’s sales forecast in Q3, the company issued guidance for the fourth quarter and industry commentary that are causing an uptick in bearish sentiment for semiconductor stocks. Texas Instruments stock was also down 4.2% as of this writing.
Why is Intel being affected by Texas Instruments?
When it comes to direct competition, Intel and Texas Instruments have little in the way of overlap. On the other hand, systems that make use of Texas Instruments’ chips may also make use of products from Intel. If Texas Instruments is seeing demand weaken, it could be a sign that Intel will face similar headwinds on the horizon. Even in situations where the two American chip giants have no direct overlap, weak performance for one can sometimes be a sign of broader industry demand trends.
With revenue of roughly $4.53 billion in the third quarter, Texas Instruments’ performance missed the average analyst estimate by roughly $60 million. Meanwhile, earnings per share of $1.85 actually beat the average analyst target by $0.03 per share. The company’s third-quarter performance itself wasn’t terribly worrying, but guidance for the fourth quarter fell far short of the market’s expectations.
Texas Instruments is guiding for fourth-quarter revenue to be between $3.93 billion and $4.27 billion, but the average analyst estimate had called for roughly $4.49 billion in sales for the quarter. On the projected earnings front, things look even worse. Texas Instruments is calling for earnings between $1.35 per share and $1.57 per share in the quarter, while the average Wall Street target suggested per-share earnings of $1.76 for the period.
Is Intel stock headed for more turbulence?
While explosive growth for artificial intelligence chips has been generating headlines and shaping stock market performance, the overall chip industry has actually been experiencing a downturn lately. The semiconductor industry tends to be cyclical, with cycles corresponding to overall macroeconomic health and the launches of major new products and technologies.
In its Q3 conference call, Texas Instruments warned that it was seeing demand continue to worsen across multiple industrial sectors. It’s not entirely clear that the same headwinds will negatively impact Intel, but there’s a fair chance that similar pressures for its business could emerge in the near term.
Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Texas Instruments. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel and long January 2025 $45 calls on Intel. The Motley Fool has a disclosure policy.