ON Stock: What’s Driving Onsemi’s Rally?

Scottsdale, Arizona-headquartered ON Semiconductor Corp [ON], also known as onsemi, manufacturers semiconductors for the automotive, industrial, cloud and consumer markets. Its main divisions include Intelligent Power Solutions, producing power semiconductors used in electric vehicles (EVs) and energy systems; Intelligent Sensing Group, which manufactures sensor, arrays and radars; and Customer Solutions, which offers foundry services to clients. 

ON stock was riding high on its increased focus on artificial intelligence (AI) in late November, but as a diversified chip manufacturer, onsemi’s growth story is both more complicated and potentially more resilient than that of pure-play AI chip firms. 

A Q3 earnings beat, an ambitious expansion plan and a share buyback announcement have drawn investor attention to this US-based, ‘picks and shovels’ chip stock. OPTO examines whether it can capitalize on its financial strength despite considerable macroeconomic headwinds. 

Onsemi Takes Center Stage

Q3 2025 results, reported in early November, saw the company’s top line dip 12% year-over-year to $1.55bn, though it still came in above Wall Street expectations of $1.52bn. Adjusted EPS of $0.63 also beat estimates of $0.59, while non-GAAP gross margin came in at 38%.

President and CEO Hassane El-Khoury noted positive growth in AI — which nearly doubled year-over-year — as well as stabilization in its core markets of automotive and industrial, underlining the firm’s $1bn design funnel. Onsemi is explicitly targeting AI data centers with its new vertical gallium nitride (GaN) platform, and is forecasting $250m in AI revenue for FY 2025. 

Looking to Q4, the company expects revenue of $1.48bn–158bn and a non-GAAP gross margin of 37–39%. “We are seeing stabilization in the near term” and growth in 2026, CEO El-Khoury added. 

Onsemi followed up on strong results with a $6bn stock buyback authorization on November 18, underlining management’s confidence in its growth trajectory. Share buybacks have been a consistent strategy to return value to shareholders, with CFO Thad Trent noting during the Q3 earnings call that, “year-to-date, we have repurchased $925m of shares, returning approximately 100% of our free cash flow to shareholders.” The new deal is set to launch on January 1, 2026. 

Most recently, in the first week of December, onsemi announced a memorandum of understanding (MoU) with Chinese firm InnoScience [2577:HK] to expand the production of its GaN power devices, targeting a larger share of the global GaN market, which is projected to reach $2.9bn in market value by 2030. The company also received approval for a €450m grant to build an integrated chip manufacturing plant in the Czech Republic that is expected to come online in 2027.

ON Stock’s Semiconductor Struggle

ON shares have had a rough 2025, with a massive dip in April reflecting the macroeconomic pressures plaguing the wider semiconductors ecosystem — most notably, supply chain issues exacerbated by tariffs and US-China trade tensions. 

Since a dip in November, however, the stock has risen considerably, driven by positive sentiment surrounding Q3 earnings and the announced share buyback program. ON extended its seven-day winning streak on December 3, rising over 11% after the company announced its global strategic cooperation with InnoScience.

Selling at $56.38 at the December 8 close, ON stock is down 10.58% in the year to date, though it is up 12.38% in the past six months. 

ON vs NXPI vs STM: Diversified Players Face Macro Headwinds

As a diversified chip manufacturer catering primarily to the automotive and industrial segments, onsemi has several prominent competitors, both domestically and internationally. 

The Netherlands’ NXP Semiconductors [NXPI] also manufactures components for the automotive and industrial sectors, as well as for IoT, mobile and communication applications. The company posted mixed results for Q3 2025, with revenue of $3.17bn exceeding guidance by $23m but representing a year-over-year drop of 2%. The non-GAAP gross margin, meanwhile, came in at 57%. The company also announced the closure of the acquisition process for automotive networking firm Avnica Links and neural processing firm Kinara, which are expected to impact revenue in 2028.

STMicroelectronics [STM], also based in the Netherlands, is of a comparable size to onsemi, and has considerable overlap in terms of business areas with both onsemi and NXP. Recently, it has unveiled numerous products aimed at smart homes and AI tools. The company reported revenue of $3.19bn in Q3 2025, driven by accelerated growth in communications and stabilization in the automotive and industrial segments. However, a miss on gross margins pushed STM stock down over 13% in the wake of earnings.

Here are how the three companies compare in terms of fundamentals:

Source: Yahoo Finance

ON Stock: The Investment Case

The Bull Case for ON Semiconductor

After a prolonged automotive downturn, Q3 earnings marked a recovery for onsemi. With strong financials and growing chip manufacturing capacity both in the US and abroad, onsemi has the potential to boost its share of the global chip market. The MoU with InnoScience is expected to address cost and supply constraints, boosting adoption of the firm’s GaN solutions. Additionally, its targeting of AI and data center-related markets could help boost its top line in the medium term. 

The Bear Case for ON Semiconductor

As a semiconductor stock, ON has to contend with the volatility inherent in the wider sector, with trade tensions and tariffs a continuing concern. More specific to its power solutions segment — which contributed 48% of total revenue in Q3 2025 — the end of EV subsidies and a general policy shift away from clean energy in the US could continue to dampen demand. Additionally, the shift to AI-focused products is unlikely to impact growth in the near term and could prove costly. Another drain on the company’s finances is the projected $200m–300m management had earmarked for restructuring between Q3 2025 and Q3 2026.

Conclusion

With the global chip sector exposed to significant headwinds, investors are on the lookout for US semiconductor manufacturers with proven financial resilience, as in the case of ON Semiconductor. With a recovery in its core markets and promising growth in AI-related revenue, onsemi is bolstering its global production capacity through partnerships and new infrastructure in Europe. However, competition from international rivals and the volatility of the wider sector could continue to weigh on ON stock for the time being.