ON Semiconductor Sees Upside as AI Demand Fuels Chip Demand

ON Semiconductor (ON) is emerging as a compelling long-term play in the semiconductor sector, fueled by accelerating demand across AI, electric vehicles, and industrial systems. The company has steadily expanded its market share in high-growth segments, particularly in power semiconductors, where its silicon carbide (SiC) technology offers efficiency advantages over traditional silicon-based components. In fiscal 2025, ON reported revenue of $4.2 billion, up 12% year-over-year, with operating margins expanding to 21.5% due to improved product mix and cost optimization. The company's strategic focus on analog and power management ICs—critical for data centers and EVs—has positioned it well as global AI infrastructure builds out. Data center demand for high-efficiency power conversion solutions has driven a 35% increase in ON’s server power product sales in Q4 2025. Meanwhile, EV-related revenue grew 44% year-over-year, supported by design wins with major automakers including Tesla and Ford for SiC-based inverter modules. ON’s CapEx investment in its 300mm wafer fabrication facility in the U.S. is expected to ramp production in late 2026, supporting domestic supply chain resilience and improving yield rates. The company has also raised its full-year 2026 revenue guidance to $4.8 billion, signaling confidence in sustained demand. With a forward P/E ratio of 22x, ON trades at a discount relative to peers like Texas Instruments (TXN) and Analog Devices (ADI), which carry forward P/E multiples above 30x. Investors are increasingly viewing ON as a balanced play—offering exposure to secular growth trends without the volatility seen in pure-play AI semiconductor names. The stock has outperformed the S&P 500 semiconductor index by 18% over the past 12 months, reflecting improving sentiment around its execution and positioning in key megatrends.