Quantfury Gazette

IBM (NYSE:IBM) and Texas Instruments (NASDAQ:TXN) are betting on catching up

Nathan Crooks
Quantfury Team

Two companies with roots from long before the internet age are trying to prove that they’re still up to compete against the newer class of tech darlings as the industry goes into overdrive to chase the latest wave of development around generative artificial intelligence. While taking different approaches, IBM (NYSE:IBM) and Texas Instruments (NASDAQ:TXN) are classic examples of seasoned giants scrambling to catch up to the latest trends, but it’s not clear if the old dogs can learn new tricks. 

IBM has ridden just about every technological wave since it was founded in 1911, from punch-cards and mainframes to personal computers. It later transitioned to focus on services and research but has been criticized by some as being somewhat slow in its foray into cloud computing. That’s why the announcement last week that it would acquire multi-cloud infrastructure automation company HashiCorp (NASDAQ:HCP) in a deal worth $6.4 billion is not a surprise. While it’s a relatively small amount for IBM with its market capitalization of more than $150 billion, the 40% premium it offered for HashiCorp’s shares signals how much it values the emerging business of cloud computing and wants a piece. 

Texas Instruments, which dates back to 1930, is playing quite a different game than IBM, focusing on legacy analog chips and embedded processors that find their way into all kinds of cars and machines. Rather than spending on acquisitions or pivoting into AI hype, the company has been investing around $5 billion a year to boost its manufacturing capabilities and build out more capacity in the US. That’s a notably high figure, amounting to nearly 30% of its revenue last year.  

Showing just how fickle the market can be in terms of managing expectations, Texas Instruments shares surged almost 8% earlier this month after it said first quarter revenue declined 16%, with net income falling 35%. Despite forecasts of similar results next quarter, analysts honed in on forward guidance that surpassed their expectations and boosted price targets as a result. The company has underperformed the Nasdaq Composite over the past five years, returning only about half as much. 

Both IBM and Texas Instruments represent the old guard of American tech companies and have survived numerous pivots in their storied histories. The question remains how well they are going to do it this time.


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