On Semiconductor Plunges 5.24%, What’s Fueling the Selloff?

Summary
• ON Semiconductor (ON) tumbles 5.24% to $59.18, hitting an intraday low of $57.01
• Texas Instruments (TXN) drags chip sector lower with a 11.87% decline
• Options activity surges in the $60–$61 call chain as volatility intensifies
• Analysts highlight restructuring costs and soft demand as key triggers
On Semiconductor’s sharp intraday selloff has sent shockwaves through the semiconductor sector, with the stock trading nearly 6% lower amid heavy volume. The decline coincides with heightened options volatility and a broader sector selloff, as investors weigh the company’s restructuring costs against its AI and SiC growth ambitions. With the stock trading near key 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 perfect storm 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.

Volatility-Driven Options and ETFs: Navigating a Turbulent On Semiconductor Trade
• MACD: 2.89 (above signal line 2.77), indicating bullish momentum
• RSI: 79.52 (overbought), 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

Traders should monitor the $53.08 support level and the $60 call chain for directional cues. 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 ON20250801C60 and ON20250801C61 contracts dominating trading volume.

• ON20250801C60 (Call, $60 strike, August 1 expiry):
- IV: 54.57% (moderate)
- Leverage ratio: 44.95%
- Delta: 0.374 (moderate sensitivity to price moves)
- Theta: -0.188 (high time decay)
- Gamma: 0.072 (high sensitivity to price acceleration)
- Turnover: $174,703
- 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: 52.11% (moderate)
- Leverage ratio: 64.42%
- Delta: 0.297 (moderate sensitivity to price moves)
- Theta: -0.158 (high time decay)
- Gamma: 0.069 (high sensitivity to price acceleration)
- Turnover: $108,310
- 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 backtest on the performance after an intraday plunge of -5% shows positive results for the entire market. The event occurred 2,982,318 times over the past five years, with a maximum return of 0.74% on the day following the plunge, indicating a generally favorable short-term rebound trend.

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. Note that Texas Instruments (TXN), the sector leader, is down 11.87%, signaling broader chip sector fragility.