Updated from 8:06 a.m. EDT

The sweet spot keeps expanding at

Texas Instruments

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.

Investors pushed shares to their highest level in more than three years after the chipmaker ratcheted up third-quarter guidance, citing growing semiconductor demand. Shares of Dallas-based TI were recently up 17 cents, or 0.5%, to $33.92.

That's on top of three consecutive days of setting new 52-week intraday highs as Wall Street apparently expected the strong forecast from the world's third-largest chipmaker.

Even before Thursday's gain, TI shares have jumped 46% since mid-April, handily outperforming a 24% climb of the Philadelphia Stock Exchange Semiconductor Sector Index and prompting some analysts to suggest that TI shares are reaching a peak.

In its midquarter update, TI said it now expects third-quarter earnings of between 36 cents and 38 cents a share, including 3 cents a share of stock-option expense, on sales of $3.48 billion to $3.62 billion.

That's up from its outlook at the beginning of the quarter, when TI

forecast earnings including stock charges of 31 cents to 35 cents a share on sales of $3.29 billion to $3.56 billion, representing growth of 1.6% to 10%.

TI's new forecast blasted past the latest consensus estimate among analysts gathered by Thomson First Call, which pegged third-quarter earnings at 35 cents a share, excluding stock charges, on $3.45 billion in sales.

"We're just in some hot areas right now that are driving a lot of strength," Ron Slaymaker, vice president and manager of TI investor relations, said in a postclose conference call. "We're not dependent on an exceptionally strong September to deliver the guidance we just gave."

TI manufactures a wide range of analog and digital signal processors used in cell phones, computers, cars and digital TVs. The company also makes sensors and controls, and educational products such as calculators.

By business unit, TI predicted semiconductor sales of $3.02 billion to $3.14 billion, up from a previous range of $2.84 billion to $3.07 billion. The company now expects sales of sensors and controls to range from $280 million to $290 million, vs. previous guidance of $275 million to $295 million.

The company lowered the high end of its targets for educational and productivity product sales, and said it expects the division to pull in sales of $180 million to $190 million, compared with a previous range of $180 million to $200 million.

Slaymaker said that orders remain strong and that TI's book-to-bill ratio -- an indicator of future demand -- is tracking above 1 in the quarter to date, which means that backlog is expanding.

TI's wireless sales in the first half of the year have benefited from the migration to 3G technology and lower-priced handsets, Slaymaker said. TI expects the increasing demand for lower-priced handsets to be an ongoing trend, he said.

"We're certainly aligned with the

wireless players out there that are gaining share," Slaymaker added.

Slaymaker also said that Asia is driving a significant portion of the company's strength. Among product lines, he cited strength in high-performance analog and digital light processing, a technology used in high-definition televisions and projectors. Both boast above-average margins.

Additionally, Slaymaker said that DLP shipments in the first half of the year were below year-ago levels but could change in the third quarter.

Other factors that contributed to stronger earnings were higher factory utilization levels and stable depreciation levels. The third quarter will mark the first time in more than five years that depreciation has fallen below 10% of revenue, Slaymaker said.

Finally, Hurricane Katrina appears to be having no impact on TI's customers, Slaymaker said. "We're coming into the heat of the holiday season, and I would say we're not seeing any discernible adjustments from our customers that would be the result of hurricanes or anything like that," he said.