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Can ON's AI Data Center Momentum Drive a Multi-Year Growth Cycle?
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Key Takeaways
ON expects AI data center revenues to double year over year in 2026 amid hyperscaler demand.
ON's AI portfolio spans silicon carbide, gallium nitride and intelligent power modules.
ON posted a third straight quarter of gross margin expansion with more gains projected for 2026.
Artificial intelligence is rapidly becoming one of the strongest growth engines for ON Semiconductor Corporation (ON - Free Report) . The company’s latest quarterly results suggest this momentum could extend well beyond 2026.
Management highlighted that AI data center revenues surged more than 30% sequentially in the first quarter, far exceeding internal expectations, as adoption expanded across hyperscalers and multiple XPU platforms. The company now expects AI data center revenues to double year over year in 2026.
ON is benefiting from rising power demands inside modern AI infrastructure. As data centers transition toward higher power density and advanced architectures, the need for efficient power conversion and management solutions is increasing sharply.
The company has built a broad portfolio that includes silicon carbide, gallium nitride, intelligent power modules and mixed signal technologies. This diverse offering positions ON well to benefit from growing AI infrastructure demand. Its solutions support the entire AI power chain, ranging from the electrical grid to processors inside data centers.
Management also emphasized that ON is gaining traction with leading hyperscalers and power supply partners, including collaborations tied to next-generation 800-volt power systems. These opportunities are expanding beyond servers into adjacent markets such as energy storage systems and microgrids, creating what executives described as an AI halo effect.
The company’s restructuring and portfolio optimization efforts are beginning to improve profitability alongside revenue growth. Gross margin expanded for the third straight quarter, while management projected continued margin improvement through the remainder of 2026.
Although automotive and industrial recovery remains gradual, ON’s growing exposure to AI infrastructure appears capable of supporting a longer-term growth cycle driven by rising global demand for efficient power solutions.
Peers Expanding AI Power Semiconductor Capabilities
Infineon Technologies AG (IFNNY - Free Report) is emerging as a major competitor in AI power infrastructure through its strong portfolio of silicon carbide and power management solutions. The company is expanding its exposure to AI servers, renewable energy and industrial power systems, areas witnessing rising demand as hyperscalers build larger data centers. Infineon is also increasing investments in gallium nitride technologies to improve power efficiency and thermal performance for next-generation AI workloads.
Monolithic Power Systems Inc. (MPWR - Free Report) is another key rival benefiting from the AI boom. The company has gained traction in power-management chips for GPUs and AI accelerators. Monolithic Power Systems’ integrated solutions help improve efficiency, reduce power losses and support higher rack densities in AI servers. As AI accelerator deployments continue to rise globally, Monolithic Power Systems is expected to remain a strong competitor to ON in the expanding AI data center-power market.
ON Price Performance, Valuation & Estimates
Shares of ON Semiconductor gained 109.4% over the past six months compared with the industry’s 74.4% rise.
ON’s One-Year Price Performance
Image Source: Zacks Investment Research
From a valuation standpoint, ON trades at a forward price-to-earnings (P/E) multiple of 31.17, down from the industry’s average of 36.43.
ON’s P/E Ratio (Forward 12-Month) vs. Industry
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for ON’s fiscal 2026 earnings per share has increased in the past 30 days. The company is likely to report strong earnings, with projections indicating a 31.5% year-over-year rise in 2026.
View the Zacks #1 Rank List
Image: Bigstock
Can ON's AI Data Center Momentum Drive a Multi-Year Growth Cycle?
Key Takeaways
Artificial intelligence is rapidly becoming one of the strongest growth engines for ON Semiconductor Corporation (ON - Free Report) . The company’s latest quarterly results suggest this momentum could extend well beyond 2026.
Management highlighted that AI data center revenues surged more than 30% sequentially in the first quarter, far exceeding internal expectations, as adoption expanded across hyperscalers and multiple XPU platforms. The company now expects AI data center revenues to double year over year in 2026.
ON is benefiting from rising power demands inside modern AI infrastructure. As data centers transition toward higher power density and advanced architectures, the need for efficient power conversion and management solutions is increasing sharply.
The company has built a broad portfolio that includes silicon carbide, gallium nitride, intelligent power modules and mixed signal technologies. This diverse offering positions ON well to benefit from growing AI infrastructure demand. Its solutions support the entire AI power chain, ranging from the electrical grid to processors inside data centers.
Management also emphasized that ON is gaining traction with leading hyperscalers and power supply partners, including collaborations tied to next-generation 800-volt power systems. These opportunities are expanding beyond servers into adjacent markets such as energy storage systems and microgrids, creating what executives described as an AI halo effect.
The company’s restructuring and portfolio optimization efforts are beginning to improve profitability alongside revenue growth. Gross margin expanded for the third straight quarter, while management projected continued margin improvement through the remainder of 2026.
Although automotive and industrial recovery remains gradual, ON’s growing exposure to AI infrastructure appears capable of supporting a longer-term growth cycle driven by rising global demand for efficient power solutions.
Peers Expanding AI Power Semiconductor Capabilities
Infineon Technologies AG (IFNNY - Free Report) is emerging as a major competitor in AI power infrastructure through its strong portfolio of silicon carbide and power management solutions. The company is expanding its exposure to AI servers, renewable energy and industrial power systems, areas witnessing rising demand as hyperscalers build larger data centers. Infineon is also increasing investments in gallium nitride technologies to improve power efficiency and thermal performance for next-generation AI workloads.
Monolithic Power Systems Inc. (MPWR - Free Report) is another key rival benefiting from the AI boom. The company has gained traction in power-management chips for GPUs and AI accelerators. Monolithic Power Systems’ integrated solutions help improve efficiency, reduce power losses and support higher rack densities in AI servers. As AI accelerator deployments continue to rise globally, Monolithic Power Systems is expected to remain a strong competitor to ON in the expanding AI data center-power market.
ON Price Performance, Valuation & Estimates
Shares of ON Semiconductor gained 109.4% over the past six months compared with the industry’s 74.4% rise.
ON’s One-Year Price Performance
Image Source: Zacks Investment Research
From a valuation standpoint, ON trades at a forward price-to-earnings (P/E) multiple of 31.17, down from the industry’s average of 36.43.
ON’s P/E Ratio (Forward 12-Month) vs. Industry
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for ON’s fiscal 2026 earnings per share has increased in the past 30 days. The company is likely to report strong earnings, with projections indicating a 31.5% year-over-year rise in 2026.
Image Source: Zacks Investment Research
ON Semiconductor currently holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.