Texas Instruments (TXN 3.93%) and NVIDIA (NVDA 2.54%) have long been big players in the tech industry, each playing the role of disruptor from time to time.
Further, both have been challenged by the ongoing trade war with China. Evolved market conditions have required nimble management and creative strategizing in order to ease this headwind's impact on business performance. Each company is navigating the new landscape and is at different stages of success.
But one is the better investment at this time. Let's take a look at the opportunities.
Texas Instruments: Challenged but moving forward
Texas Instruments reported gloomy third-quarter 2019 earnings on Oct. 22, falling short of analyst expectations on everything important, including guidance.
Revenue came in at $3.77 billion versus estimates of $3.8 billion. Earnings per share were posted as $1.40 excluding a $0.09 benefit for items not in original guidance due to discrete tax benefits. Analyst estimates were for $1.42 per share.
Guidance for fourth-quarter revenue was between $3.07 billion and $3.33 billion versus expectations of $3.6 billion; earnings per share were forecast to be between $0.91 and $1.09, versus estimates of $1.28.
Texas Instruments had been an easy stock to recommend, with steady performance and a consistent dividend. But the latest earnings report contained the phrase "most markets weakened" along with revenue down 11% year over year, and that raised eyebrows.
Texas Instruments now has had four consecutive quarters of negative year-over-year growth. The biggest reason cited is trade tensions with China, which send ripples through all Texas Instruments markets. The declines in communications equipment attracted attention, with revenue declining about 35% from a year ago and 20% sequentially. Upper single digit declines were reported in the industrial, automotive, and personal electronics segments.
Despite challenging market conditions, the company's balance sheet remains strong, with $5.07 billion of cash and short-term investments at the end of the third quarter.
In September, a quarterly dividend increase of 17% was announced, marking the 16th consecutive year of dividend increases.
NVIDIA adapts to the trade war environment
Chipmaker NVIDIA is no stranger to dealing with issues. The company's revenue contracted thanks to the cryptocurrency crash and a purchasing pause by data center companies. The China trade war weighed on all markets, hitting NVIDIA along with all the others.
But NVIDIA has turned the corner and is moving forward with initiatives that take it away from China dependence.
On Nov. 14, it issued third-quarter earnings, beating on both the top and bottom lines of its consensus. Earnings were $1.78 per share versus a $1.57 analyst expectation, and revenue was $3.01 billion versus the $2.91 billion analyst expectation.
CEO Jensen Huang sees the company at the center of the "smart everything revolution," also known as the Internet of Things. The glue holding the network together would be NVIDIA's EGX Edge Supercomputing Platform -- a cloud-based product merging artificial intelligence (AI) and 5G networks.
Partnering with NVIDIA is Ericsson (ERIC 2.14%), a Swedish telecommunications company. The platform will fuse 5G, supercomputing, and AI for a revolutionary communications platform someday, supporting trillions of always-on devices.
A Swedish partnership was a genius idea, as it makes it possible for large telco customers to obtain the technology but remain neutral in the China trade war.
Huang started NVIDIA 15 years ago, and has the experience to lead the integration of cutting-edge technologies, bringing NVIDIA into a new age of prosperity.
The company issued positive fourth-quarter guidance, forecasting $2.95 billion in revenue, plus or minus 2%. This implies a nearly 34% increase.