Jefferies’ Top Crowded Semiconductor Short Positions: Top 10 Stocks

2. ON Semiconductor Corporation (NASDAQ:ON)

Number of Hedge Fund Holders In Q2 2024: 45

Shares Short % Of Outstanding: 5.56%

ON Semiconductor Corporation (NASDAQ:ON) is the silicon carbide manufacturer that we mentioned in the introduction to this piece.  The fact that its shares are down 18.31% year to date along with its exposure to the automotive and industrial industries also makes it unsurprising that it is the second most overweight short semiconductor stock among institutional investors according to Jefferies. A lack of diversification has hit ON Semiconductor Corporation (NASDAQ:ON) hard since during H1 2024, 53% of its $3.6 billion in revenue came from automotive products. Reduced industrial activity and industrial inventory buildup also led to the firm’s H1 2024 industrial revenue dropping by 21% annually. Subsequently, two key factors are driving ON Semiconductor Corporation (NASDAQ:ON)’s hypothesis. First is naturally a recovery in its key markets, and as long as it remains muted, investors should stay on the sideline. The second is ON Semiconductor Corporation (NASDAQ:ON)’s downsizing strategy through which it aims to offload some semiconductor fabrication to contract manufacturers. While this can allow the firm to reduce operating expenses, it carries the risk of being at the mercy of industry capacity in case industrial and automotive activity sharply picks up.

Artisan Partners mentioned ON Semiconductor Corporation (NASDAQ:ON) in its Q1 2024 investor letter. Here is what the fund said:

“ON Semiconductor is a leading designer and manufacturer of chips for power management and image sensing. From a battery-electric vehicle (EV) standpoint, ON is a leading producer of silicon carbide chips. Shares have been under pressure as the company grapples with multiple quarters of inventory right-sizing across the entire auto supply chain and slower-than-expected growth of EV sales. However, ON is seeing smaller sales declines than peers due to market share gains, and we believe the company will be equally well positioned if automakers rebalance their efforts from full EVs toward hybrid vehicles. We remain patient.”