Key Points
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ON Semiconductor trades at attractive value multiples despite strong growth potential.
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The company is investing in share buybacks and has key partnerships in the automotive and AI sectors.
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Near-term headwinds exist, but long-term prospects in EVs and AI/data centers remain promising.
ON Semiconductor (NASDAQ: ON), a key player in intelligent power and sensing solutions, is positioned for future growth in the electric vehicle (EV) and AI/data center markets. The company trades at 21 times estimated 2025 earnings and 14.5 times estimated 2025 free cash flow, with a projected 25% increase in earnings next year following a current trough year. Recently, management approved a $6 billion share buyback program over the next three years.
In the automotive sector, ON Semiconductor supplies power and sensing chips to major companies like Volkswagen, BMW, and ZEEKR, although it faces challenges due to a slowdown in EV sales and general industrial market weakness. CEO Hassane El-Khoury believes these end markets are stabilizing and will grow again, supported by ongoing investments in AI and data solutions, which are expected to account for about $250 million of the projected $6 billion revenue in 2025.
