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Why ON Semiconductor is a Key Bet for Billionaire Glenn Dubin Amid EV and AI Growth

Eli GrantSunday, May 11, 2025 5:03 pm ET

40min read

Billionaire investor Glenn Russell Dubin has long been a contrarian in the markets, favoring bets on companies positioned to thrive in structural shifts rather than fleeting trends. Nowhere is this philosophy clearer than in his $53.39 million stake in ON Semiconductor (NASDAQ: ON), a semiconductor giant that sits at the intersection of two of the most compelling growth stories today: electric vehicles (EVs) and artificial intelligence (AI) infrastructure.

Dubin’s confidence in ON Semiconductor isn’t just about near-term performance—it’s about the company’s ability to capitalize on secular trends. For instance, the firm’s silicon carbide (SiC) chips, critical for managing energy in EVs, are already in high demand. Meanwhile, its power management solutions are becoming essential as data centers and cloud infrastructure evolve to support AI workloads. Yet, despite these tailwinds, ON’s stock has been held back by near-term challenges, creating what Dubin views as a compelling entry point.

The Q1 2025 Results: Strengths and Stumbles

In its latest quarterly report, ON Semiconductor reported revenue of $1.45 billion, comfortably above midpoint guidance. Non-GAAP earnings per share (EPS) came in at $0.55, outpacing estimates. A standout was its free cash flow, which surged 72% year-over-year to $455 million—a staggering 31% of revenue. This cash windfall allowed the company to repurchase $300 million in shares, or 66% of its quarterly free cash flow, signaling confidence in its valuation.

But not all metrics shone. Gross margins fell 530 basis points sequentially to 40%, a drop blamed on automotive sector headwinds and pricing adjustments. The automotive segment, which accounts for roughly 30% of revenue, has been particularly volatile due to supply chain disruptions and shifting demand.

The Upside Potential: 45% to $60 by 2025?

Dubin’s analysis assigns ON Semiconductor a 45.29% upside potential, pricing the stock at $60 by late 2025. This optimism hinges on three pillars:

EV and SiC Dominance: ON’s SiC chips are critical for EVs, enabling faster charging and longer ranges. The firm recently secured a multiyear supply agreement with a major automaker, and it plans to ramp up SiC production capacity by 50% by 2026.
AI Infrastructure Growth: Data centers are shifting toward more energy-efficient power solutions, and ON’s power management chips are a core component of this transition.
Shareholder Returns: The company aims to return 100% of free cash flow to shareholders through buybacks and dividends, a strategy that should amplify returns as margins stabilize.

The Risks and the Trade-Off with AI Stocks

Dubin’s thesis isn’t without risks. The automotive sector’s volatility remains a concern, as evidenced by the margin squeeze in Q1. Additionally, while ON’s long-term prospects are strong, some investors may prefer faster-growing AI stocks trading at lower valuations. One unnamed AI stock mentioned in the analysis, for instance, trades at less than 5x earnings, potentially offering quicker returns.

Yet ON Semiconductor’s diversified revenue streams—including its industrial and “other” markets, which grew 12% in Q1—provide a buffer against sector-specific downturns. The company’s free cash flow margin target of 25–30% for 2025 also suggests resilience in varying economic conditions.

Conclusion: A Core Holding for the Next Decade

Glenn Dubin’s bet on ON Semiconductor isn’t just about a single quarter or even a single sector—it’s about owning a company at the heart of two of the most transformative industries of the next decade. With $455 million in free cash flow in Q1 alone, a 45% upside potential, and a clear strategy to capitalize on EVs and AI, ON looks undervalued despite near-term headwinds.

While margin pressures and automotive volatility remain risks, the stock’s 40% gross margin (even after the decline) and its $300 million share repurchase in Q1 demonstrate financial discipline. For investors willing to look beyond quarterly noise, ON Semiconductor’s alignment with clean energy, infrastructure spending, and reshored manufacturing—themes Dubin has emphasized for years—makes it a rare blend of growth and stability.

At current prices, the stock offers a compelling entry point, especially if the company’s Q2 guidance of $1.4–1.5 billion in revenue holds. The path to $60 by 2025 may not be linear, but for those with a long-term lens, ON Semiconductor is a foundational holding in an era defined by technological revolution.

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