On Semiconductor Surges 4.6% Amid Sector-Wide Optimism: What’s Fueling the Rally?

Summary
• On Semiconductor (ON) rockets 4.6% to $59.33, piercing a $60.065 intraday high
• Sector news highlights SIA’s support for U.S. AI supply chain initiatives and global semiconductor sales growth
• Leveraged ETFs like PXIU (35.7% gain) and SMU (27% surge) amplify semiconductor sector momentum

On Semiconductor’s explosive move aligns with a broader semiconductor sector rally driven by policy tailwinds and AI demand. With global chip sales rising 4.7% month-to-month and SIA’s endorsement of the Pax Silica initiative, investors are betting on a sustained upcycle. The stock’s 4.6% gain—its strongest intraday performance since October—reflects a confluence of macroeconomic optimism and sector-specific catalysts.
Sector-Wide Tailwinds Drive On Semiconductor Higher
The Semiconductor Industry Association’s (SIA) recent endorsement of the U.S. State Department’s Pax Silica initiative, coupled with record global semiconductor sales growth (4.7% MoM in October), has ignited sector-wide optimism. These developments signal a strategic shift toward securing AI and supply chain infrastructure, directly benefiting companies like ON. Additionally, the Trump administration’s decision to allow Nvidia H200 chip exports to China has eased concerns over U.S.-China trade tensions, further boosting semiconductor demand. ON’s position in power and analog solutions for AI infrastructure positions it to capitalize on this momentum.

Semiconductor Sector Rally Gains Momentum as Trade Policies and AI Demand Converge
The semiconductor sector is outperforming broader markets, with leveraged ETFs like PXIU (35.7% gain) and SMU (27% surge) surging alongside ON’s rally. Intel (INTC), the sector’s leader, posted a modest 0.18% intraday gain, underscoring ON’s stronger technical momentum. The SIA’s advocacy for streamlined permitting reforms and AI export frameworks has created a favorable backdrop, with ON’s 4.6% move outpacing peers like AMD and TSMC in short-term volatility.

Options and ETFs in Focus: Leveraging the Semiconductor Rally
• MACD: 1.016 (above signal line 1.170), RSI: 53.27 (neutral), 200D MA: 48.98 (below price)
• Bollinger Bands: Price at $59.33 exceeds upper band ($56.76), signaling overbought conditions
• Key Levels: 200D support at $49.64–$50.25, 30D support at $54.95–$55.19

ON’s technicals suggest a continuation of its bullish trend, with the 200D MA acting as a critical support threshold. Leveraged ETFs like PXIU and SMU offer amplified exposure to the sector’s momentum. For options, ON20260109C55 (strike $55, delta 0.77, IV 92.03%) and ON20260109C54 (strike $54, delta 0.797, IV 102.14%) stand out. Both contracts exhibit high leverage ratios (13.3% and 10.24%) and strong liquidity (turnover $173,804 and $4,046), making them ideal for short-term plays. A 5% upside scenario (target $62.29) would yield a C55 payoff of $7.29 and C54 payoff of $8.29, assuming time decay and gamma sensitivity remain favorable.

Backtest On Semiconductor Stock Performance
The performance of ON Semiconductor (ON) after a 5% intraday surge on September 1, 2022, has been mixed. While the stock did experience a notable gain that day, its performance in the broader context of the past months has been volatile and largely negative.1. September 1, 2022, Surge: ON shares saw a 5% increase on that day, which was a significant boost following previous performance.2. Subsequent Performance: However, in the period from September 1, 2022, to the present day, ON's stock price has not maintained this momentum. In fact, it has faced significant downward pressure, with recent data showing a decline of around 14% from the beginning of 2022.3. Market Context: The broader semiconductor industry has faced challenges, with factors such as inflation, chip shortages, and production cuts in key markets like automotive and consumer electronics affecting performance. ON has been impacted by these factors, with production challenges and lowered forecasts from key customers like Aptiv.4. Comparative Performance: When compared to other semiconductor stocks, ON's performance has been in line with the broader industry trends. For instance, Texas Instruments (TI), another semiconductor company, has also seen a decline of around 14% from the beginning of 2022, while ON's performance has been similarly lackluster.In conclusion, while the 5% surge on September 1, 2022, was a positive event for ON Semiconductor, the stock's overall performance in the months since has been underwhelming due to industry-wide challenges and specific challenges facing the company. The decline of around 14% from the start of 2022 reflects the prevailing pressures in the semiconductor sector.

Positioning for the Next Leg: On Semiconductor’s Breakout and Sector Synergy
ON’s 4.6% surge reflects a perfect storm of sector-specific optimism and macroeconomic tailwinds. With the 200D MA ($48.98) acting as a critical support and leveraged ETFs amplifying momentum, the stock is poised to test its 52W high of $63.63. Investors should monitor the C55 and C54 options for gamma-driven acceleration if the $60.065 intraday high is retested. Meanwhile, Intel’s 0.18% gain underscores the sector’s broader strength. For aggressive bulls, PXIU offers a 35.7% leveraged bet on the semiconductor upcycle. Watch for a breakdown below $55.04 or a regulatory shift in AI export policies to gauge the move’s sustainability.