We recently published a list of 10 Undervalued Semiconductor Stocks to Buy According to Analysts. In this article, we are going to take a look at where ON Semiconductor Corporation (NASDAQ:ON) stands against other undervalued semiconductor stocks to buy according to analysts.
Global market intelligence firm IDC, in its most recent report, projected a 15% growth for the global semiconductor market in 2025, driven by the relentless rise in demand for artificial intelligence (AI) and high-performance computing (HPC). According to their analysts, this surge will be fueled by forthcoming upgrades in key application markets, notably cloud data centers. Further emphasizing the industry’s promising growth outlook, Nicolas Gaudois, head of Asia-Pacific technology research at UBS, stated in a recent CNBC interview that AI-compute will continue to underpin growth in 2025. He observed:
“The 21% growth in the semiconductor market was mostly driven by AI-compute demand while non-AI growth actually declined. In 2025, AI would remain the growth driver with 40% growth but we expect non-AI portion to also grow by 17% due to several factors such as autos and industrial markets growth improving, restocking (customers buying for their inventories) in those markets and also increase in semiconductor content in devices to support edge (on-device) AI.”
Nicolas also suggested that GPU chipmakers and foundries will remain the main beneficiaries of AI demand and will make the most money from it. With the semiconductor space ripe for further growth, we have picked 10 semiconductor stocks that are undervalued and are best placed to benefit from this growth.
Our Methodology
To identify the 10 undervalued semiconductor stocks, we carried out thorough research and used stock screeners to compile a list of U.S.-listed companies. Our criteria included a market capitalization of over $2 billion, an expected share price upside of at least 10%, and a Forward PE ratio below 30x. Ultimately, the stocks were ranked in ascending order of their upside potential. These stocks are also popular among elite hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A semiconductor engineer in a state-of-the-art laboratory, analyzing advanced semiconductor products.
ON Semiconductor Corporation (NASDAQ:ON)
Upside Potential: 58%
Fwd. PE: 13.9
The second stock on our list is ON Semiconductor Corporation (NASDAQ:ON), boasting a forward P/E ratio of approximately 14.0x. The company is a prominent manufacturer of intelligent power and sensing solutions, primarily catering to the automotive and industrial markets. Its advanced technologies are pivotal in various sectors, including vehicle electrification and safety, sustainable energy grids, industrial automation, and 5G and cloud infrastructure.
Despite facing challenges in 2024, with a roughly 20% year-on-year revenue decline over the first nine months due to slower demand, ON Semiconductor Corporation (NASDAQ:ON) remains strategically well-positioned in the rapidly growing automotive and industrial markets. The company’s total addressable market (TAM) is substantial, estimated at $44 billion, with a notable $16 billion opportunity in electric vehicles. This strong market positioning underpins the company’s long-term growth prospects.
In line with its growth strategy, ON Semiconductor Corporation (NASDAQ:ON) recently completed the acquisition of Qorvo’s Silicon Carbide Junction Field-Effect Transistor (SiC JFET) technology business for $115 million in cash. Simon Keeton, group president and general manager of the Power Solutions Group, emphasized the significance of this acquisition, stating:
“This acquisition further strengthens onsemi’s leadership in power semiconductors by providing disruptive and market leading technologies to our customers to solve their most pressing power density and efficiency problems in AI data centers, automotive and industrial markets.”
Overall, ON ranks 2nd on our list of undervalued semiconductor stocks to buy according to analysts. While we acknowledge the potential of ON to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ON but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article is originally published at Insider Monkey.
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