AI Is Reviving an Overlooked Chip Category—and These 3 Names Are Riding the Demand Wave

Key Points

• Texas Instruments' Q1 2026 results, including 22% analog chip revenue growth, signal improving conditions across the broader analog semiconductor sector.
• Analog Devices and Microchip Technology have each posted strong year-to-date share gains alongside earnings beats driven by AI, industrial, and automotive demand.
• onsemi's 70% year-to-date rally and $6 billion buyback program are tempered by a price-to-earnings ratio near 270 and a consensus price target well below current trading levels.

Now may be a time for investors to watch an often-overlooked corner of the semiconductor industry: analog chips.

Why? Texas Instruments Inc. NASDAQ: TXN, one of the primary domestic producers of these chips, recently posted notably strong earnings for the first quarter of 2026.

Driving TI's 19% year-over-year (YOY) overall revenue growth was the firm's data center business, which experienced sales growth of about 90% over the same period. However, analog chip sales were a key contributing factor as well, growing by 22% YOY.

Analog chips don’t grab headlines the way leading-edge AI processors do, but they’re essential to power delivery and signal management in data centers, vehicles, and industrial systems. After TI’s report suggested improving conditions, three analog-focused names stand out for different reasons—from AI-linked demand to automotive leverage to cash-return programs.

Analog Devices: AI Tailwinds and an Industrial Recovery

Analog Devices Inc. NASDAQ: ADI shares are up 43% year-to-date (YTD), tracking along with a strong Q1 2026 performance, including revenue of $3.2 billion, up 30% YOY.

The company's success has been thanks in large part to its AI-related businesses, which now comprise some 20% of revenue with a run rate above $2 billion. But industrial demand more broadly is picking up and forecast to continue to grow throughout the first half of the year.

Investors may also be intrigued by Analog Devices' strong dividend prospects: the company's dividend yield is 1.12%, and its annualized five-year dividend growth rate is 10.1% after a recent 11% increase to its distributions in February 2026.

Analog's market share is increasing, and its margins remain strong. In addition, 27 of the 31 analysts who cover ADI have rated the stock a Buy.

Microchip Technology: Automotive and Industrial Strength Helped Drive a Quarterly Sales Beat

Analog semiconductor manufacturing firm Microchip Technology Inc. NASDAQ: MCHP has had a volatile two years, in part due to inventory mismatches and tariff impact.

However, shares of MCHP are now up by just over 30% YTD, with the bulk of that rally happening in just the past several weeks.

Amid a major push to unveil new products and ramp up manufacturing capacity, Microchip has come in ahead of targets. The firm beat its internal sales target for the latest quarter, reaching $1.19 billion in net sales and non-GAAP earnings per share (EPS) of 44 cents. In both cases, these figures were also higher than analyst predictions.

Microchip has also been active on the automotive front. In early February 2026, the company announced a collaboration with Hyundai Motor Group to explore 10BASE-T1S Single Pair Ethernet for future in-vehicle connectivity, underscoring its focus on next-generation vehicle architectures.

At the same time, though, inventory and manufacturing underutilization are persistent concerns that are likely to remain for multiple years. This hasn't held analysts back from rating Microchip a consensus Moderate Buy, with 18 of the 26 analysts assigning it a Buy.

onsemi: Cash Returns Stand Out, But Valuation Questions Linger

onsemi NASDAQ: ON, a maker of semiconductor components for managing electrical power and signals across a host of applications, has been a major beneficiary of the analog boom in recent months.

The company, which operates under the onsemi brand, has seen its share price soar nearly 73% YTD and seems on pace to reach a new all-time high.

One of the key elements attracting investors to onsemi is its cash flow. The company generated a 24% free cash flow margin for 2025, an internal record, allowing it to buy back about $1.4 billion in stock and initiate a new $6-billion buyback program.

Fueling this aggressive move to return value to shareholders is massive demand for AI data centers. The company saw more than $250 million in AI revenue last year alone, and this is expected to accelerate and grow by close to 20% on a sequential basis in the current quarter.

onsemi is also funneling a good portion of this money back into product development, and its analog and mixed-signal Treo platform has already seen strong success in automotive and other applications.

With such a rapid rise in share price in recent months, investors may rightly worry about valuation. ON's price-to-earnings ratio of around 270 is, admittedly, quite high. At the same time, it is likely to continue to grow along multiple fundamental metrics, with analysts expecting around 39% in earnings growth in the coming year.

The question may be whether this is enough to sustain a rally going forward. Wall Street is divided, with 15 analysts rating ON a Buy, 14 a Hold, and one a Sell. In addition, ON shares are trading in the low 90s, which is significantly above the consensus price estimate of $67. Investors must assess whether the estimate needs to be adjusted based on demand momentum or if ON could be due for a correction.