On Semiconductor Plunged 8.63%: What's Behind the Sharp Drop in ON Shares?

Summary
• Intraday price fell to $57.01, a 8.63% drop from previous close of $62.45
• Options activity surged with 1,144 contracts traded for the $60 call expiring August 1
• Trading at 53.3% below 52-week high of $80.08 and 7.6% above 52-week low of $54.65
• Analysts highlight strategic realignment and AI infrastructure bets as long-term catalysts despite near-term pain

On Semiconductor's abrupt 8.63% selloff has shaken the semiconductor sector, with the stock trading at $57.06 as of 2:34 PM. The decline coincides with heightened options volatility and broader sector weakness, as investors weigh the company's restructuring costs against its long-term AI and SiC growth ambitions. With the stock approaching critical support levels, traders are dissecting technical and fundamental triggers for the move.

Earnings Guidance Cuts and Restructuring Costs Trigger Sharp Selloff
ON Semiconductor's intraday plunge stems from a convergence of near-term headwinds: sharply revised earnings guidance and restructuring costs. The Zacks Consensus projects a 43.7% year-over-year decline in Q2 EPS and a 42.7% drop in full-year 2025 EPS, driven by demand softness in industrial and computing markets. Meanwhile, the company’s $47 million in quarterly savings from fab closures and workforce reductions is weighing on revenue growth. Analysts at Goldman Sachs and Susquehanna have downgraded price targets, with the latter cutting its target to $60 from $75, signaling skepticism about the path to profitability. The selloff reflects investor concern over the trade-off between short-term margin expansion and long-term growth visibility.

Semiconductor Sector Mixed as Navitas Outperforms Amid AI Hype
While ON Semiconductor struggles, its sector peer Navitas (NVTS) has surged 370% year-to-date, driven by GaN innovations and EV design wins. Navitas’ first production-ready bidirectional GaN IC and partnerships with Changan Auto position it as a leader in electrification, contrasting with ON’s reliance on SiC and automotive imaging. The semiconductor sector remains fragmented: TSMC and Intel face AI-driven demand, while analog chipmakers like ON navigate margin pressures. ON’s forward P/S ratio of 4.07X—well below Navitas’ 19.74X—highlights divergent valuations, with ON trading at a discount despite its long-term SiC and AI infrastructure plays.

Leveraged ETFs and Options Volatility: Navigating a Volatile On Semiconductor Trade
• MACD: 2.89 (above signal line 2.77), indicating bullish momentum
• RSI: 79.52 (overbought territory, suggesting potential reversal)
• Bollinger Bands: Current price ($58.635) sits between lower band ($51.05) and middle band ($57.15), signaling consolidation
• 200D MA: $54.65 (below current price, hinting at short-term strength)
• Key support/resistance: 30D support at $52.85–$53.08; 200D resistance at $53.33–$54.18

ON’s technicals paint a mixed picture: RSI suggests overbought conditions, while MACD and Bollinger Bands hint at lingering bullish momentum. The stock’s 6.1% drop has triggered a surge in options activity, particularly in the $60–$61 call chain. For traders, the focus is on short-term volatility and liquidity in the options market. The Tradr 2X Long GEV Daily ETF (GEVX) and Tradr 2X Long QBTS Daily ETF (QBTX), up 26.19% and 18.79% respectively, offer leveraged exposure to the semiconductor sector amid the selloff. However, ON’s own options chain suggests a bearish bias, with the 2025-08-01 $60 call and $61 call dominating trading volume.

• ON20250801C60 (Call, $60 strike, August 1 expiry):
- IV: 46.79% (moderate)
- Leverage ratio: 57.41%
- Delta: 0.348971 (moderate sensitivity to price moves)
- Theta: -0.166690 (high time decay)
- Gamma: 0.082402 (high sensitivity to price acceleration)
- Turnover: $181,219
- Payoff at 5% downside (ST = $55.65): $0 (strike not in the money)
- This contract stands out for its high gamma and moderate delta, ideal for directional bets amid high volatility.

• ON20250801C61 (Call, $61 strike, August 1 expiry):
- IV: 46.90% (moderate)
- Leverage ratio: 79.42%
- Delta: 0.274270 (moderate sensitivity to price moves)
- Theta: -0.140989 (high time decay)
- Gamma: 0.074041 (high sensitivity to price acceleration)
- Turnover: $121,650
- Payoff at 5% downside (ST = $55.65): $0 (strike not in the money)
- This contract offers higher leverage and liquidity, making it a top pick for volatility traders.

If $53.08 support holds, ON20250801C60 offers short-term bullish potential. For aggressive downside plays, the ON20250801P55 put (delta -0.205, leverage 123.36%) could capitalize on a breakdown.

Backtest On Semiconductor Stock Performance
The strategy that experienced a 9% intraday plunge showed no return during the backtest period, with a CAGR of 0.00% and an excess return of -88.65%, significantly underperforming the benchmark return of 88.65%. The strategy's maximum drawdown was also notable at 0.00%, indicating it failed to recover from the substantial intraday decline, highlighting its risk management challenges.

Bullish Long-Term Play, But Short-Term Caution Warranted
ON Semiconductor’s selloff is a buying opportunity for long-term investors, with the stock trading at a 4.07X forward P/S ratio—well below its 3-year median of 3.95X. However, near-term headwinds from restructuring costs and soft demand in industrial markets will likely keep the stock volatile. Traders should monitor the $53.08 support level and the $60 call chain for directional cues. Meanwhile, Navitas (NVTS) continues to outperform, with its GaN-driven EV and solar design wins offering a stark contrast. For those with a longer time horizon, ON’s strategic realignment and AI infrastructure bets could drive a rebound—provided the sector’s broader tailwinds hold. Watch for a breakdown below $52.85 or a reversal above $60.

Action Insight: The sector leader Texas Instruments (TXN) is down -11.92%, signaling broader analog chipmaker fragility. Investors should prioritize liquidity and volatility metrics in options while keeping a close eye on ON’s 200D MA at $54.65 as a critical support threshold.