(Reuters) - Texas Instruments ( TXN ) jumped 7% in premarket trade on Wednesday, sparking a rally in chip stocks as its strong second-quarter revenue forecast fanned optimism that chip demand was picking up after a years-long slump.

The company is seen as a bellwether for semiconductor demand, as its products are used across industries ranging from automotive to industrial and consumer electronics including smartphones.

Shares of Nvidia ( NVDA ), Advanced Micro Devices ( AMD ), Arm Holdings and Micron Technology ( MU ) rose between 1% and 3%.

Texas Instruments ( TXN ) said on Tuesday it expects revenue with a midpoint of $3.8 billion for the second quarter, compared with LSEG estimates of $3.77 billion.

Its earnings are closely watched as it is the first among major U.S. semiconductor firms to report quarterly results.

"Looking ahead, we anticipate Texas Instruments ( TXN ) to drive a continued recovery profile into the 2H (second half) of the year and into 2025" said J.P. Morgan analysts in a note.

Improving demand for consumer electronics also indicates that analog chip inventory corrections might be easing.

The company had seen a slump in demand for chips used in automotive markets as demand for electric vehicles slowed owing to an uncertain economy and availability of cheaper hybrid alternatives.

(Reporting by Zaheer Kachwala in Bengaluru; Editing by Varun H K)