Texas Instruments just projected its biggest sales slowdown in three years. Wall Street almost seems disappointed it isn't worse.

The chipmaker's fourth-quarter results late Tuesday reflected the sharp downturn in demand being felt across many of the sector's end markets. Revenue growth went negative on a year-over-year basis for the first time since early 2020 as the company noted declining sales to its industrial market as well as segments reflecting communications equipment, personal electronics and gear used in data centers.

The auto industry was the lone and notable standout. TI said sales in that sector rose in the mid-single digit percentage range on a year-over-year basis.

Still, revenue of $4.6 billion for the quarter exceeded Wall Street's estimates. And while TI projected an 11% revenue decline for the first quarter, the midpoint of that forecast of $4.35 billion was only 1% below analysts' targets. That counted as an improvement over the 7% miss the company's last forecast delivered three months ago.

Continued strength in the auto sector complicates the investment thesis that the chip industry needs orders to bottom out before chip stocks can make a sustained recovery from a sharp selloff last year. UBS analyst Tim Arcuri noted that TI's results "offered little to sway the debate on the cycle," and he kept his neutral rating on the stock.

The recent downturn in sales hasn't shaken TI's faith in its plan to increase its manufacturing capacity to meet long-term demand trends. Those trends include much higher chip content in cars due to electrification, which is good for TI as a key supplier of so-called analog chips that are made on mature manufacturing tools that are in particularly short supply.

In a report last week, analysts at S&P Global Mobility predicted that "analog chips will remain the bottleneck" for the industry this year.

Given TI's long history of conservative capital management and its strong position in market segments where its chips tend to have long shelf lives that can better survive short-term swings in demand, analysts largely agree with its move.

But it is still a costly endeavor . TI outlined a plan last year to significantly boost its capital expenditures for the next few years to build up capacity, and some expect the company to raise that bet further in its capital allocation call planned for next week.

Analyst Stacy Rasgon of Bernstein said TI might even plow some of the tax credits it is receiving from the recently-passed Chips Act meant to stimulate domestic semiconductor production back into its expansion plan, adding that "doubling down now could easily leave them in an advantaged position."

Analysts currently expect TI's capital expenditures this year to reach 20% of revenue—the highest in more than two decades. This chip company needs EV makers to keep their feet on the gas.