ON Semiconductor Plunges 10% Intraday: Pricing Pressures and Market Volatility Collide

Summary
• ON Semiconductor (ON) drops 10.3% to $50.97 amid pricing pressures and margin compression
• Q2 revenue declines 15.36% Y/Y to $1.47B, adjusted gross margin falls 770 bps to 37.6%
• Xiaomi partnership with EliteSiC M3e highlights EV innovation amid sector headwinds

ON Semiconductor’s stock is in freefall, plunging over 10% intraday as investors react to a stark earnings report highlighting industry-wide pricing pressures. The stock’s sharp decline contrasts with a resilient semiconductor sector, where Texas Instruments (TXN) defies the trend with a 0.92% gain. With the stock trading near its 52-week low of $31.04, the move underscores a critical juncture for the chipmaker as it balances near-term challenges with strategic EV partnerships.

Pricing Pressures and Revenue Decline Trigger Sharp Correction in ON Semiconductor
ON Semiconductor’s 10.3% intraday collapse stems from a confluence of deteriorating financial metrics and sector-specific headwinds. The company reported a 15.36% Y/Y revenue decline to $1.47B in Q2, with adjusted gross margin collapsing by 770 bps to 37.6% and adjusted operating margin dropping 1,020 bps to 17.3%. While revenue exceeded analyst estimates, the margin compression signaled intensifying pricing pressures across its core segments—Power Solutions, Analog and Mixed-Signal, and Intelligent Sensing. CEO Hassane El-Khoury’s remarks on stabilization efforts and EV innovation with Xiaomi’s YU7 electric SUV provided a glimmer of hope, but near-term volatility appears locked in as investors weigh the company’s path to margin recovery.

Semiconductors Sector Mixed Amid ON’s Slide as TXN Climbs 0.92%
The broader semiconductor sector remains resilient despite ON Semiconductor’s selloff. Texas Instruments (TXN), a sector leader, rose 0.92% as demand for analog components remains robust. The semiconductor industry’s 2.34% daily return outperformed the S&P 500’s 1.19%, driven by AI and EV tailwinds. However, ON’s 10.3% drop highlights divergent performance within the sector, where pricing pressures in commoditized segments like power solutions contrast with growth in high-margin areas like AI and automotive. This divergence underscores the importance of strategic differentiation in a market where gross margin dynamics are becoming a key differentiator.

Options & ETF Playbook: Navigating ON’s Volatility with Strategic Leverage
• 200-day average: 54.12 (below current price) • RSI: 43.46 (oversold) • MACD: 1.04 (bearish divergence with signal line at 1.73) • Bollinger Bands: Price at 50.97 (near lower band at 54.76) • Key Support/Resistance: 53.32–54.18 (200D range) and 59.44–59.64 (30D range)

ON’s technicals paint a volatile short-term outlook. The stock is trading near its 52-week low and below critical 200-day support at $54.12, with RSI signaling oversold conditions. However, the bearish MACD histogram (-0.69) and short-term bearish Kline pattern suggest further downward pressure. Leveraged ETFs like ProShares Ultra Semiconductors (USD), up 4.42%, and Direxion Daily MU Bull 2X Shares (MUU), up 4.59%, reflect sector resilience but may not fully hedge ON’s idiosyncratic risks. Traders should monitor the 53.32–54.18 support zone and 59.44–59.64 resistance range for reversal signals.

Top Option 1: ON20250808C51 (Call, Strike: $51, Expiry: 2025-08-08, IV: 57.84%, Leverage: 38.54%, Delta: 0.50, Theta: -0.34, Gamma: 0.116, Turnover: 97,930) • IV (Implied Volatility): High volatility expectation • LVR (Leverage Ratio): High reward potential • Delta: Moderate sensitivity to price moves • Theta: Significant time decay • Gamma: Strong sensitivity to price acceleration • Turnover: High liquidity
This contract offers a balanced risk-reward profile, with high leverage and moderate delta. If ON rebounds above $51, the option could gain 38.54% of the underlying’s move. However, theta decay (-0.34) means time is a headwind, favoring a near-term breakout.

Top Option 2: ON20250808C52 (Call, Strike: $52, Expiry: 2025-08-08, IV: 55.27%, Leverage: 59.85%, Delta: 0.38, Theta: -0.28, Gamma: 0.116, Turnover: 66,092) • IV: Mid-to-high volatility • LVR: High reward • Delta: Lower sensitivity to price • Theta: Moderate decay • Gamma: Strong sensitivity • Turnover: Solid liquidity
This contract’s high leverage (59.85%) and gamma (0.116) make it ideal for a directional bet if the stock breaks above $52. Theta decay (-0.28) is manageable given the 4-day expiry, and the moderate delta (0.38) suggests it’s better suited for a strong reversal rather than a gradual recovery.

Payoff Scenario: Assuming a 5% downside to $48.42 (50.97 - 5%), the ON20250808C51 would expire worthless (strike at $51), while ON20250808C52 would also expire out-of-the-money. Aggressive bulls may consider ON20250808C51 into a bounce above $51, while ON20250808C52 offers high-reward potential if the stock breaks above $52 with a 59.85% leverage boost.

Backtest On Semiconductor Stock Performance
The performance of ON after a -10% intraday plunge can be expected to show a recovery, but the extent of the rebound may vary. Here's an analysis based on technical indicators and market behavior:1. Technical Analysis Indicators: - The Moving Average Convergence Divergence (MACD) has a bearish signal with a MACD death cross, indicating a potential continuation of the downward trend. - The Relative Strength Index (RSI) is likely oversold, suggesting that a rebound could occur as the price moves towards an equilibrium state. - The Bollinger Bands indicate that the price is near the lower band, which could precede a potential upward movement as the price moves back towards the bands' middle and upper ranges.2. Market Behavior and Liquidity: - The liquidity crisis observed in Replimune Group (REPL) may not directly affect ON, but it could influence market sentiment and trading activity, potentially leading to increased volatility. - The absence of block trades or bid support in the market could indicate that any rebound is likely to be driven by short-term traders or algorithms.3. Rebound Potential: - Historical patterns suggest that stocks often rebound after a significant drop, especially if the initial decline was driven by panic or overselling. - The 52-week high of $17 for ON now seems like a distant memory, with the current price significantly lower, which could indicate a potential for a rebound towards the average of previous trading ranges.4. Conclusion: - ON is likely to experience a rebound after the -10% intraday plunge, given the oversold conditions and potential for mean reversion in technical indicators. - However, the exact trajectory of the rebound is uncertain and will depend on various factors, including market sentiment, liquidity, and the broader economic and sector-specific news. - Investors should consider these factors and possibly wait for signs of stabilization or reversal patterns before making decisions about ON.

Immediate Action Required: Position for Volatility or Rebound
ON Semiconductor’s 10.3% intraday drop reflects a critical inflection point for the stock, with margin compression and sector-specific challenges creating a volatile backdrop. While the CEO’s stabilization comments and EV partnerships offer long-term promise, near-term technicals favor caution. Traders should prioritize short-term options like ON20250808C51 and ON20250808C52 for directional bets, while monitoring the 53.32–54.18 support zone for a potential reversal. In the broader sector, Texas Instruments (TXN)’s 0.92% gain highlights the divergence between high-margin and commoditized segments. Act now: Watch for a breakdown below $53.32 or a breakout above $59.44 to define the next move.