Business

Mizuho just rerated these 3 AI winners

By Thomas Richmond TheStreet

Updated May 21, 2026 8:07 AM

Mizuho analyst Vijay Rakesh upgraded his price targets on Micron Technology (MU), STMicroelectronics (STMPA), and Texas Instruments (TXN) this week, arguing that AI data center demand is creating durable tailwinds for both analog chips and memory in ways the market hasn't fully priced in yet. He lifted his price targets for Micron to $800 from $740, STMicro to $68 from $56, and Texas Instruments to $300 from $255.

Rakesh's thesis boils down to three key ideas:

AI servers are becoming more power-intensive, increasing semiconductor content per system.
Lead times and pricing are improving in data center markets even as automotive demand remains soft.
AI demand is keeping NAND and DRAM markets tight into 2027, with potential supply disruptions adding further upside risk.

Here's why Texas Instruments could be one of the most interesting of the three calls today.

Texas Instruments: more than a cyclical rebound

Texas Instruments has moved back into focus as investors treat it as an AI winner rather than a pure analog recovery trade. The company posted$4.8 billion in revenue, with industrial revenue up more than 30% year over year and data-center revenue up about 90%, showing two demand engines accelerating at the same time.

The AI angle adds a structural layer on top of the industrial normalization investors already expected. Higher-power server architectures require more analog content per system, particularly in power management. That lifts TXN's dollar content per server and supports the kind of pricing and lead-time strength Rakesh flagged in his note.

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Q2 revenue guidance of $5.0-$5.4 billion points to continued momentum. The bigger proof point will come from another quarter or two of double-digit industrial growth and outsized data-center gains.

If those trends hold, TXN's recovery starts to look structurally different from prior analog cycles.

Free cash flow is recovering fast

Beyond demand, the cash flow picture at Texas Instruments has improved sharply. Trailing 12-month free cash flow rose to $4.4 billion from $1.7 billion a year earlier as fabrication spending began to normalize.

First-quarter capex came in at $676 million, and CHIPS Act incentives are helping offset part of the domestic buildout cost.

Recovering free cash flow gives TXN more room to support its dividend, buy back shares, and fund balance-sheet flexibility without leaning on the cycle.

It also makes higher earnings estimates more credible, since more of the profit can reach shareholders rather than being absorbed by construction costs. As capital intensity eases ahead of a full-cycle revenue peak, one of the key overhangs on the multiple starts to lift.

Inventory normalization supports cleaner analog recovery

Texas Instruments' balance sheet also shows the analog downturn moving past its trough in a more orderly way than many investors expected. Inventory fell to $4.7 billion in the first quarter, and inventory days improved to 209 from 222 sequentially.

Management said inventory declined during the quarter while service levels stayed strong enough to support a rapid increase in customer demand. Lower inventory reduces the risk of correction, while stable delivery capability enables TXN to capture returning orders without operational friction.

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Improving inventory alongside genuine demand growth gives investors more confidence that recent shipments reflect real consumption rather than channel noise.

A cleaner inventory profile also supports pricing discipline, which matters more than a short-term volume boost in the early stages of a semiconductor rebound.

What could push Texas Instruments stock higher

AI servers need more power management silicon per system, giving TXN a content tailwind that goes beyond a volume recovery
Industrial orders broadening across customers extends the recovery and improves margins as factories run fuller
Easing fab spending frees up cash for buybacks and dividends, removing one of the key overhangs on the stock
Cleaner inventory makes recent demand look like real consumption rather than channel restocking, which matters early in a rebound
Strong internal manufacturing gives customers a reliability reason to stick with TXN when supply gets tight

What could break the thesis

AI spending shifts toward custom power designs, cutting TXN out of the high-value server platforms driving the thesis.
Industrial customers pause after restocking, exposing how much of the recovery was timing rather than real end demand.
Domestic fab costs stay elevated longer than expected, delaying the free cash flow improvement investors are pricing in.
Pricing softens as lead times normalize, limiting margin upside even if unit volumes hold up.
Data-center demand stays concentrated in a handful of customers, making results volatile if any one of them slows deployment.

Key takeaways for Texas Instruments

Mizuho's upgrades across Micron, STMicroelectronics, and Texas Instruments share a common theme: AI data center demand is doing more than lifting volumes. It is raising the chip content and complexity per system in ways that support pricing, lead times, and margins across both analog and memory.

For Texas Instruments specifically, the combination of industrial recovery, AI-driven data-center growth, easing capex, and cleaner inventory gives the rebound a more durable shape than a standard upcycle. The next few quarters will show whether that mix can sustain itself long enough to drive a lasting rerating in the stock.

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This story was originally published May 21, 2026 at 7:37 AM.