Is This Artificial Intelligence (AI) Stock Finally Entering Its Breakout Phase?

I've got a great deal for you: A super-advanced computer equipped with the latest Nvidia graphics processing unit (GPU), top-of-the-line internal and external components, and all the bells and whistles you could want, for thousands of dollars below the market price!

What's the catch?

Well, it's only missing one little component that barely costs anything compared to the GPU and the other fancy stuff: An internal thermostat. So the computer's never going to know when it's overheating. That means you'll have to take its temperature yourself every few minutes with an external thermometer, and then manually turn on its fan if it looks like it's getting too hot, otherwise, the whole thing will fry.

Whattaya say? Do we have a deal?

Image source: Getty Images.

Of course we don't have a deal! Even though we never think about them, components like analog chips, internal thermostats, on/off switches, transmitters, and receivers are critical to making computers work, and there's no realistic way to work around their absence. That's even true for the high-performance computers running artificial intelligence (AI) computations.

Tens of thousands of these basic-but-essential computer components are manufactured by Texas Instruments (NASDAQ: TXN). The company's recent performance has lagged the rest of the booming AI industry, but that could be about to change. Here's why this AI stock may finally be entering its breakout phase.

Why Texas Instruments has underperformed

Texas Instruments used to be a big outperformer. Between 2009 and 2021, it crushed the market, returning 1,110% compared to the S&P 500's 427.7%. That doesn't even factor in the company's generous dividend payments, which currently yield about 3%. But the market for analog computer chips is notoriously cyclical, and 2022 kicked off a rough patch for the company.

In the post-lockdown era, the semiconductor market's cyclical downturn began as the automotive market slowed down considerably. New vehicles, with their numerous electrical and electronic systems, are a major end market for Texas Instruments' analog chips and sensor components, so this hurt the company's sales and profits a lot.

Although revenue and net income began to recover in 2025, concerns about tariffs from overseas manufacturers, like consumer electronics makers, have resulted in a slower-than-expected recovery cycle for the company.

Image source: Getty Images.

Why the turnaround might be imminent

So why is this AI stock finally entering its breakout phase now? Well, with AI investments expected to surge further in 2026, Texas Instruments stands to benefit. Its components are critical to some of the hottest emerging AI industries, including autonomous driving, robotics, and, of course, data centers.

AI has already begun to transform the company's finances. For the first nine months of 2025, Texas Instruments reported 50% year-over-year sales growth in its data center business. Meanwhile, management has taken advantage of the company's depressed share price to buy back $1.6 billion worth of stock and increase the dividend for the 22nd consecutive year.

Shares of Texas Instruments are already up nearly 10% so far this year. Now looks like a great time to buy shares in this hot AI opportunity before the market catches on.

John Bromels has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia and Texas Instruments. The Motley Fool has a disclosure policy.