ON Semiconductor's Strategic Position in the AI and Electrification Megatrends: A Blueprint for Innovation-Driven Growth

The semiconductor industry is undergoing a transformative shift, driven by the twin megatrends of artificial intelligence (AI) and electrification. For investors, companies that can navigate demand stabilization while leveraging innovation to capture emerging markets are poised for outsized returns. ON Semiconductor (onsemi) stands out as a prime example, with its strategic alignment to these trends and its execution prowess in 2023–2025.

AI: Powering the Next-Generation Data Center Ecosystem

ON Semiconductor's Q3 2025 results underscore its growing influence in the AI sector. The company reported revenue of $1.55 billion for the quarter, a 6% sequential increase and above analyst expectations, driven largely by its AI data center business, which nearly doubled year-over-year. This performance reflects onsemi's ability to meet the insatiable demand for power-efficient solutions in AI infrastructure.

A critical component of onsemi's strategy is its collaboration with NVIDIA to advance 800 VDC power solutions for next-generation AI data centers. This partnership aligns with the broader industry shift toward higher-voltage systems, which reduce energy losses and improve efficiency-a necessity as AI workloads scale. Additionally, onsemi's investment in vertical GaN (vGaN) technology positions it to capitalize on the growing demand for compact, high-performance power components in edge computing and data centers.

The macroeconomic backdrop further validates onsemi's focus. The global AI semiconductor market is projected to grow at a 15.23% CAGR from 2025 to 2034, reaching $232.85 billion by 2034. With onsemi targeting a 53% gross margin by 2027 and a 10–12% revenue CAGR over the same period, its financial goals are tightly coupled with the trajectory of AI adoption.

Electrification: Dominating the EV Power Semiconductor Landscape

In the electrification sector, onsemi holds a commanding position in the power semiconductors market for electric vehicles (EVs). As of 2024, the company, alongside Infineon, Microchip, and STMicroelectronics, collectively commanded a 45.7% market share. This dominance is underpinned by its leadership in silicon carbide (SiC) and gallium nitride (GaN) technologies, which are critical for improving the efficiency and range of EVs.

The market dynamics are highly favorable. The power semiconductors for EVs market is forecasted to grow at a 24.1% CAGR from 2025 to 2034, reaching $68.2 billion by 2034. ON Semiconductor's expertise in power management, combined with its focus on AI-driven manufacturing, positions it to benefit from both the scaling of EV production and the increasing complexity of power systems.

Regional shifts in supply chains also present opportunities. As U.S. and Chinese governments incentivize domestic manufacturing, onsemi is well-positioned to leverage its global footprint to meet localized demand. This strategic flexibility is crucial in an industry where geopolitical tensions and trade policies can rapidly reshape competitive landscapes.

Innovation as a Growth Engine

ON Semiconductor's long-term success hinges on its ability to balance demand stabilization with innovation. The company's investments in materials science (e.g., vGaN and SiC) and advanced packaging technologies are not just incremental improvements but foundational shifts that address the performance bottlenecks of AI and electrification. For instance, vGaN's ability to reduce switching losses by up to 50% compared to traditional silicon-based solutions directly addresses the energy efficiency needs of data centers and EVs.

Moreover, onsemi's financial discipline-evidenced by its progress toward a 53% gross margin by 2027-ensures that innovation is paired with profitability. This is a critical differentiator in an industry where capital-intensive R&D can strain margins.

Conclusion: A Compelling Case for Long-Term Investors

ON Semiconductor's strategic alignment with AI and electrification, coupled with its execution track record and innovation pipeline, makes it a compelling investment. The company's ability to stabilize demand through diversified applications (data centers, EVs, industrial systems) while pushing the boundaries of semiconductor technology positions it to outperform broader industry trends. As the semiconductor market grows to $697 billion in 2025, onsemi's focus on high-margin, high-growth segments ensures it is not just riding the wave but shaping its direction.

For investors seeking exposure to the next phase of the tech cycle, ON Semiconductor offers a rare combination of macro tailwinds, operational excellence, and technological leadership.