Investing.com -- Stifel upgraded Texas Instruments to Buy from Hold on Tuesday, raising its price target to $250 from $215, citing an expected inflection in free cash flow (FCF) generation as the chipmaker exits a prolonged capital investment cycle.

The new target implies roughly 20% upside from the latest closing price. Shares in the chipmaker rose 1.6% in premarket trading by 08:33 ET.

Analysts led by Tore Svanberg said TXN is "well positioned to capture share in the next analog upcycle and return to strong FCF generation" following six years of elevated capital expenditure (capex) that weighed on profitability and returns.

The core of Stifel’s thesis rests on normalizing capital intensity. With gross capex expected to decline from $2.39 billion in 2026 to $2.20 billion in 2027 under the base case, the firm projects FCF per share rising from $8.13 in 2026 to $9.60 in 2027 and $10.61 in 2028.

CHIPS Act incentives, including an investment tax credit that recently increased to 35% under the One Big Beautiful Bill Act, are seen providing additional support, with total projected CHIPS Act benefits reaching $1.55 billion in 2026.

The analysts also highlighted TXN’s pending acquisition of Silicon Laboratories as a meaningful earnings contributor over time. They project the deal could drive over 10% EPS accretion by 2030, accounting for revenue synergies from integrating SLAB’s wireless connectivity products into TXN’s industrial and automotive channels, as well as manufacturing savings from shifting SLAB production into TXN’s internal 300mm fabs.

Data center exposure represents another growth avenue. Stifel projects TXN’s data center revenue — currently around 9% of total sales — to reach 20% by 2029 under the base case, growing at a 35% compound annual rate.

The analysts drew a parallel to component shortages that constrained system shipments in early 2026, arguing that power management chips are becoming a similar bottleneck for large-scale AI infrastructure buildouts, a gap TXN’s expanded domestic capacity is positioned to fill.

"TXN is addressing this supply concern through its 300mm domestic capacity expansion, which provides a dependable source of foundational analog and power management chips," they wrote.

On manufacturing, the team said the transition to 300mm wafers — targeting more than 80% of revenue on that process by 2030 — should eventually provide up to 800 basis points of gross margin accretion, though near-term depreciation pressure is expected to offset those gains through 2026 before the dynamic reverses in 2027.

Stifel set a bull-case target of $286, contingent on faster end-market demand and accelerated data center penetration.