Shares of Texas Instruments plummeted by 12.3% after issuing a weaker-than-expected forecast for the third quarter, raising concerns about future demand for its chips amid global economic uncertainties.

The negative market reaction extended to the semiconductor sector, with stocks of peers like Analog Devices and NXP Semiconductors also declining, reflecting widespread investor caution.

Despite beating expectations in the second quarter with a revenue of $4.45 billion and net income of $1.3 billion, Texas Instruments' outlook for Q3 was cautious, projecting revenue between $4.45 billion and $4.8 billion, below analyst estimates.

Management cited challenges such as a sluggish automotive market, U.S. tariffs, and inventory pull-forwards by customers as factors complicating demand assessment and contributing to the cautious outlook.

The company's stock, trading at around $189.47, is down 14.4% from its 52-week high of $221.25, but has gained 1.3% since the start of 2025, reflecting recent volatility.

Investors are watching key support levels, with $190 as a critical point; a break below this could signal a move toward $172, aligning with previous lows.

The broader market sentiment was influenced by recent warnings from industry giants like ASML, which cautioned about uncertain growth prospects amid geopolitical tensions, especially between the US and China.

The semiconductor sector remains highly volatile, with stocks like Power Integrations experiencing significant price swings—more than 5% on 15 occasions over the past year—highlighting market sensitivity.

While some sectors like automotive and communications show resilience, the overall industry faces headwinds from global trade tensions, tariffs, and changing demand patterns.

Despite recent setbacks, the industry is seeing opportunities in emerging software stocks leveraging generative AI, which could drive future growth, contrasting with the slower recovery in traditional analog markets.

Investors who bought $1,000 worth of Texas Instruments shares five years ago would now see their investment grow to approximately $1,468, illustrating long-term growth despite recent volatility.

In contrast, Power Integrations' shares have declined by about 12.6% since the start of 2025, now valued at $53.11, reflecting the sector's mixed performance.