It's no secret that over the last three years, top semiconductor manufacturer Texas Instruments ( TXN 0.69% ) has underperformed both the S&P 500 and the semiconductor industry (as measured by the iShares Semiconductor ETF ) by a wide margin. Data by YCharts .
So far in 2024, Texas Instruments (TI) stock has been heating back up, rallying nearly 20% since April. The latest earnings report provided limited reasons for optimism, but it turns out a notable activist investor purchasing shares and getting vocal might be the best reason investors may want to take heed. TI's "capex holiday" turns into a spending spree The activist investor in question here is Elliott Management, which, at the end of May, disclosed a $2.
5 billion stake in TI stock. Elliott Management was clear in its proposal: Cut back on capital expenditures (or capex, spending on property and equipment) and return the business to free cash flow (FCF)-per-share growth. Elliott's proposal essentially just suggests TI should return to its long-vaunted key financial metric -- (FCF)-per-share, which accounts for capex spending -- sooner rather than later.
TI has kept capex in check for years (what I call the TI "capex holiday"), which helped keep FCF steadily on the rise in grand fashion for nearly two decades. But something changed as of late. Data by YCharts .
Originally outlined back in 2022, in response to pandemic-era chip shortages and expectations for massive long-term increases in power chip demand from automake.
