Why ON Semiconductor Could Be Your Next Big Bet

Recovering end markets, excellent valuation, and growth in AI data center sales make this stock attractive.

Shares of ON Semiconductor have been on a wild ride. They’re up 53% since I called them out for 2026 and 31% year-to-date. But, in the hustle and bustle of New York, the past doesn’t hold much clout. What matters is, where’s this stock headed next?

Peddling Past Performance

Let’s be real—past glory means zilch without future prospects. Despite the soaring share price, there’s still a genuine sparkle in this stock. It’s not too late to jump on the bandwagon.

ON Semiconductor: At the Turning Point

The Electrification Playbook

ON Semiconductor’s magic is in its power and sensing chips. These are key players in the electrification and automation arenas. The company is honing its skillset on silicon carbide (SiC) and gallium nitride (GaN) chips. SiC chips thrive under high temperatures and voltage, making them perfect for electric vehicles (EVs) and renewable energy. Meanwhile, GaN chips’ high-speed capabilities serve AI data centers and aerospace sectors.

The Tough Road

The road hasn’t been all smooth sailing. Investments in EVs and renewable energy have lagged. Plus, the U.S. industrial sector’s been sluggish since late 2022.

Check the chart; it’s all there. Auto and industrial sales grew in the last two quarters, a much-needed sign of life. Management predicts first-quarter 2026 revenue between $1.435 billion to $1.535 billion, marking year-over-year growth—finally.

CEO’s Confidence

CEO Hassane El-Khoury sees “clear signs of improvement across automotive, industrial, and AI infrastructure,” hinting they’ve hit an inflection point. Wall Street agrees, expecting 4.8% revenue growth and a 24% jump in earnings per share.

The Value Proposition

Here’s why ON Semi’s a steal. The company cranked out $1.4 billion in free cash flow in 2025, about 4.9% of its market cap. Analysts think they’ll convert 25% of revenue into free cash flow by 2026. Their stock trades at a price-to-FCF multiple of 18.1. That’s as rare as a cozy subway ride during rush hour. Plus, they kicked off a $6 billion share-repurchase program in January.

Risks and Rewards

The China Factor

Sure, there’s risk with exposure to Chinese EVs, but the potential? Huge. AI data centers are already contributing a dazzling $250 million to the $6 billion revenue pot in 2025.

Industrial and EV Rebound

The industrial sector’s bouncing back, and EV spending is stabilizing. Despite recent price hikes, the valuation remains mouthwatering. With a $6 billion buyback for a company valued at $28.4 billion, there’s ample room to grow.

In the heartbeat of the Big Apple, ON Semi’s story is unfolding. With a recovering market and thriving opportunities, this stock might just be the next big headline.

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