We recently compiled a list of the 10 Most Undervalued Semiconductor Stocks to Buy Now. In this article, we are going to take a look at where ON Semiconductor Corporation (NASDAQ:ON) stands against the other semiconductor stocks.
Deloitte expects that the broader semiconductor industry saw a remarkable growth in 2024, with sales touching $627 billion, outpacing the previous forecasts. This momentum is projected to continue, with 2025 sales anticipated to touch $697 billion. This will be a new record and will keep the industry on track to reach $1 trillion in sales by 2030. On a broader perspective, this growth trajectory showcases a CAGR of 7.5%, potentially doubling to $2 trillion by 2040.
Semiconductor Trends to Watch Out For in 2025
As per Orbit & Skyline, a leading semiconductor services provider, the broader semiconductor industry is expected to see strong transformation by 2025, thanks to the advancements in technology, transition in market demands, and the requirement for sustainable practices. The semiconductors continue to play a key role in fueling innovations throughout various sectors, such as artificial intelligence (AI), the Internet of Things (IoT), and automotive technologies. Notably, AI and ML integration, growth in automotive semiconductors, edge computing, and advanced packaging technologies are some of the key trends that are expected to shape the semiconductor industry.
The demand for AI-driven semiconductors continues to increase, with companies accelerating to develop chips capable of handling complex AI workloads. Furthermore, Orbit & Skyline, while highlighting the comments from the Chief Executive of a leading semiconductor firm, mentioned that the rise of EVs and autonomous driving technologies continue to fuel the demand for automotive semiconductors.
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What’s In Store for Semiconductor Industry in 2025?
The semiconductor industry remains well-placed for a strong growth in 2025. As per Microchip USA, an expert component supplier, emerging technologies such as AI, hyperscale cloud computing, and autonomous vehicles continue to fuel demand for advanced chips and memory solutions. The rapid expansion of hyperscale data centers is expected to continue to fuel semiconductor demand. With higher reliance on cloud services, the infrastructure supporting such platforms needs innovation constantly. Therefore, advanced processors, custom silicon solutions, and high-capacity memory modules remain crucial for handling the robust workloads generated by cloud computing.
Microchip USA also highlighted that AI and cloud computing can be termed as “interdependent forces,” magnifying each other’s impact. While AI workloads need the scalability and computational power of the cloud, the cloud platforms continue to rely on AI to improve services and optimize operations. As a result, both technologies are at the forefront of the growth outlook for the semiconductor industry.
Amidst these favourable trends, we will now have a look at the 10 Most Undervalued Semiconductor Stocks to Buy Now.
Close-up of Silicon Die are being Extracted from Semiconductor Wafer and Attached to Substrate by Pick and Place Machine. Computer Chip Manufacturing at Fab. Semiconductor Packaging Process.
Our Methodology
To list the 10 Most Undervalued Semiconductor Stocks to Buy Now, we used a screener to shortlist stocks that trade at a forward P/E of less than ~20x. Next, we filtered out the ones that were popular among hedge funds, as of Q4 2024. Finally, the stocks were arranged in ascending order of their hedge fund sentiment.
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 373.4% since May 2014, beating its benchmark by 218 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)
Forward P/E as of March 3: ~18.4x
Number of Hedge Fund Holders: 52
ON Semiconductor Corporation (NASDAQ:ON) offers intelligent sensing and power solutions in the US and internationally. Allegro MicroSystems has been drawing takeover interest from the company, reported Bloomberg. Elsewhere, Mizuho analyst Vijay Rakesh has kept an “Outperform” rating on both Allegro MicroSystems and ON Semiconductor Corporation (NASDAQ:ON). Mizuho expects the potential deal to drive synergies and expand ON Semiconductor Corporation (NASDAQ:ON)’s robust portfolio through the addition of Allegro’s leading magnetic sensor portfolio.
Evercore ISI is also optimistic about the company considering its ongoing turnaround efforts and the potential for a strong revenue generation because of its Treo platform. The firm also expects an improvement in ON Semiconductor Corporation (NASDAQ:ON)’s gross margins, courtesy of a cyclical recovery, together with the reduction in supply chain inventories. Overall, Evercore ISI’s optimism stems from the company’s financial trajectory and strategic initiatives. The company remains focused on maintaining its financial discipline and streamlining its operations. Therefore, the broader growth of the semiconductor market hints at several opportunities for ON Semiconductor Corporation (NASDAQ:ON), mainly in sectors like industrial automation, energy-efficient solutions, 5G infrastructure and consumer electronics.
Overall ON ranks 4th on our list of the most undervalued semiconductor stocks to buy now. While we acknowledge the potential of ON as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued 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.
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Disclosure: None. This article is originally published at Insider Monkey.
