UBS: Analog chip inventory down 10%, cycle continues upward, Texas Instruments top pick

S, according to Chaoxiang Research, UBS Group's October 16, 2026 research report indicated that distributor inventories of analog chips fell by 7% to 10% quarter-over-quarter in Q3, with power analog down 10%, true analog down 7%, and microcontrollers down 5%; prices rose by 9% to 12% quarter-over-quarter; net demand expectations for the near future +79%; 70% of distributors and 76% of direct buyers expressed concern over supply shortages in the coming six months; Texas Instruments (TXN) Q3 revenue is expected to grow by 10.7% quarter-over-quarter, exceeding the seasonal rate of 6.1%.

UBS opined that with strong demand, tightening supply, a bullish price outlook, and low distributor inventories, the analog chip cycle still has room to move higher. TXN's finished goods inventory stands at 75 days, above the industry average of 39 days, making it the top pick due to its inventory positioning, potential for market share recovery, and free cash flow inflection point; Analog Devices (ADI)'s Q3 revenue is expected to increase by 8.5% quarter-over-quarter, surpassing the seasonal 4.6%, with earnings expectations also positive.