--- title: "Microchip's CEO called data center a bubble. Texas Instruments owns the capacity he cannot rent." description: "Microchip beat the quarter, guided December a hair light and fell 10% while its own book-to-bill sits above 1. Texas Instruments, which owns the fabs Microchip rents, guided flat with a restored cash machine and a February capital decision ahead." publisher: "The Inference" section: "Chips" published: 2026-11-08T16:10:28.951Z modified: 2026-11-08T16:10:28.951Z canonical: https://theinference.org/article/microchip-s-ceo-called-data-center-a-bubble-texas-instruments-owns-the-capacity-he-cannot-rent language: en keywords: "Semiconductors, Microchip Technology, Texas Instruments, Earnings, Guidance, Analog Chips" --- # Microchip's CEO called data center a bubble. Texas Instruments owns the capacity he cannot rent. > Microchip beat the quarter, guided December a hair light and fell 10% while its own book-to-bill sits above 1. Texas Instruments, which owns the fabs Microchip rents, guided flat with a restored cash machine and a February capital decision ahead. [Microchip Technology](https://theinference.org/markets/companies/microchip-technology), a maker of analog and microcontroller chips sold into factories and cars, beat Wall Street on its September quarter and still [lost 10% on November 6](https://startupfortune.com/microchip-technology-stock-drops-10-after-weak-december-guidance/), closing at $58.35 [1]. The trigger was the December guide: [sales of $1.573–1.638 billion](https://finance.yahoo.com/markets/stocks/articles/microchip-sinks-10-soft-december-193440802.html), about 1% below the $1.63 billion analysts expected [1][2]. On the call, chief executive [Steve Sanghi](https://theinference.org/markets/people/steve-sanghi) went further: "data center is in a bubble and the second derivative of growth must come down substantially" [1][2]. ## The bubble is his own best customer The quote is strange arithmetic. Data center is 16.7% of Microchip's own sales, more than $250 million last quarter and up 55.7% from a year earlier [1]. And the guide's real cause was supply, not demand. Lead times at the foundries and assembly houses Microchip rents have stretched to 32 weeks, high-margin product cannot ship until the March quarter, book-to-bill is above 1 and the March backlog is bigger than December's [1]. The orders exist. The capacity does not. ## The split screen of one week [Texas Instruments](https://theinference.org/markets/companies/texas-instruments) sells to the same factories and car makers, and it guided December roughly flat at about $6.05 billion, within a $5.80–6.30 billion range [2][3]. [NXP](https://theinference.org/markets/companies/nxp) guided up 2% [2]. On November 6 Microchip fell 10% and Texas Instruments fell 0.28% [2]. Microchip was already down 43% from its May high [1]. ## The owned fabs are printing again Texas Instruments' third quarter was its best in years: [revenue of $6.055 billion against $4.742 billion a year earlier](https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000097476), up 28%, net income of $2.425 billion, EPS of $2.62 [1][3]. Trailing free cash flow reached $8.422 billion, against $2.415 billion a year ago [3][7]. *Chart: **Texas Instruments revenue accelerated into the quarter Microchip guided down** Line chart of Texas Instruments quarterly revenue from Q4 2023 through Q3 2026, rising from $4.08 billion to $6.06 billion with the last point highlighted* *Texas Instruments quarterly revenue, $ billions, calendar quarters, from SEC filings via company_series and BörsenNEWS [3][7]* The cash matters because of what it just paid for. TI [lifted its dividend 7% to $1.52 a share in September](https://www.tikr.com/blog/better-dividend-stock-texas-instruments-vs-cisco), the 23rd straight annual increase, after the fab build pushed dividends to 338% of free cash flow in fiscal 2023 and 192% in fiscal 2025; the payout now takes 71% [4]. Cash from operations rose 43% year over year to $9.9 billion [4]. TI also priced $2.0 billion of senior unsecured notes to help fund the planned Silicon Laboratories acquisition [5]. *Chart: **The fab build outspent the dividend's cash; coverage has healed** Bars chart of Texas Instruments dividends as a percent of free cash flow: 338% in fiscal 2023, 192% in fiscal 2025, 71% in the twelve months to September 30, 2026, with the latest bar highlighted* *TI dividends as percent of trailing free cash flow; fiscal years ended December, TTM to September 30, 2026; TIKR [4]* ## The counterpoint TI is not standing outside Sanghi's bubble. Its own data-center revenue grew about 95% year over year to about 13% of sales [6], and its trailing free cash flow includes $1.6 billion of CHIPS Act incentives [6]. If the second derivative does come down, TI compresses with everyone else, and the market is already paying for the recovery: TI closed at $311.49 while [Simply Wall St's own DCF puts fair value at $183.88](https://finance.yahoo.com/markets/stocks/articles/texas-instruments-txn-could-29-151820473.html) [5]. The owned-capacity reading also leans on Microchip converting its backlog into shipped revenue in March [1]. ## What to watch TI reports again in late January, and its February capital-management call is the first since dividend coverage healed [4]. Capex lands at the higher end of $2–3 billion this year, and management plans to modulate 2027 tool installations on revenue growth and free cash flow per share [6]. That call is the fork: spend the recovered cash on more capacity, or return it. The bubble rents its fabs. February shows what the landlord does next. Earlier in this coverage: Texas Instruments' $5.8 billion payout needed $1.2 billion of CHIPS Act cash ([October 7](https://theinference.org/article/texas-instruments-5-8-billion-payout-needed-1-2-billion-of-chips-act-cash)) and [Silicon Labs](https://theinference.org/markets/companies/silicon-labs)' $9.06 spread to Texas Instruments hinges on Beijing ([October 8](https://theinference.org/article/silicon-labs-9-06-spread-to-texas-instruments-now-hinges-on-beijing)). ## Takeaway Microchip's weak December guide is a capacity problem, not a demand problem, while landlord Texas Instruments owns the fabs, prints free cash flow and decides in February whether to spend it on more capacity or return it. ## Sources 1. [StartupFortune, Ron Patel, Microchip Technology stock drops 10% after weak December guidance, 7 November 2026](https://startupfortune.com/microchip-technology-stock-drops-10-after-weak-december-guidance/) 2. [Yahoo Finance, Michael Douglass, Microchip Sinks 10% on Soft December Guidance as CEO Says "Data Center Is in the Bubble", 6 November 2026](https://finance.yahoo.com/markets/stocks/articles/microchip-sinks-10-soft-december-193440802.html) 3. [BörsenNEWS.de, Jetzt hat es auch Texas Instruments erwischt: Abverkauf als Chance bei dieser Tech-Aktie, 8 November 2026](https://www.boersennews.de/nachrichten/artikel/boersennews/jetzt-hat-es-auch-texas-instruments-erwischt-abverkauf-als-chance-bei-dieser-tech-aktie/5343224/) 4. [TIKR.com, Bobby Sankhagowit, Better Dividend Stock: Texas Instruments vs. Cisco, 6 November 2026](https://www.tikr.com/blog/better-dividend-stock-texas-instruments-vs-cisco) 5. [Yahoo Finance / Simply Wall St, Sasha Jovanovic, Texas Instruments (TXN) Could Be 29% Undervalued As Fresh Debt Fuels Its Silicon Laboratories Deal, 5 November 2026](https://finance.yahoo.com/markets/stocks/articles/texas-instruments-txn-could-29-151820473.html) 6. [Yahoo Finance / Moby Intelligence, Texas Instruments Incorporated Q3 2026 Earnings Call Summary, 21 October 2026](https://finance.yahoo.com/markets/stocks/articles/texas-instruments-incorporated-q3-2026-004147126.html) 7. [Texas Instruments, quarterly figures from SEC filings, retrieved 8 November 2026](https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000097476) --- Microchip's CEO called data center a bubble. Texas Instruments owns the capacity he cannot rent. — The Inference. Canonical: https://theinference.org/article/microchip-s-ceo-called-data-center-a-bubble-texas-instruments-owns-the-capacity-he-cannot-rent