The demand for AI data centers remains strong! ON Semiconductor Corporation (ON.US) is favored by several Wall Street institutions, and the trend of gross margin improvement is expected to continue until the end of the year.

ON Semiconductor Corporation (ON.US) reported its second-quarter performance and guidance, receiving a generally positive outlook from Wall Street analysts. The company's stock price rose by about 7% in pre-market trading on Tuesday but erased its gains after the market opened, trading up 0.58% at $80.92 at the time of publication. Several institutions believe that the artificial intelligence (AI) data center business is becoming the company's most important growth engine, while industrial and automotive segments are gradually improving. Coupled with rising orders, capacity utilization, and gross margins, the company's fundamentals are expected to improve further. Jefferies maintains a "Buy" rating on ON Semiconductor Corporation, with a target price of $115. Analyst Blayne Curtis's team indicated that the AI data center business is rapidly becoming the core growth driver, with revenue expected to increase by about 200% year-on-year, significantly outpacing most analog chip companies; meanwhile, the industrial and automotive businesses are also showing moderate recovery. Jefferies noted that the company's delivery cycles, order-to-shipment ratios, and capacity utilization are continuously improving, which will support gross margin expansion on a quarter-over-quarter basis for the remainder of the year. The firm also expressed encouragement over the sustained growth and improving profitability of the AI business, believing that the analyst day scheduled for September 16 will further elaborate on growth opportunities in the AI data center field. Susquehanna also holds a positive outlook on ON Semiconductor Corporation and maintains a target price of $150. Analyst Christopher Rolland's team stated that the company's second-quarter performance and third-quarter guidance both slightly exceeded market expectations, primarily driven by growth in the AI data center business. The firm also pointed out that the overall industry conditions continue to improve, with several key cyclical indicators showing positive trends this quarter, including upgrades in customer demand, order-to-shipment ratios, and revenue from the mass market. Additionally, the companys average delivery cycle has extended by about five weeks, reflecting sustained market demand. Susquehanna believes that overall, this is a robust earnings report, with the expanding demand for AI data centers providing significant upward momentum for the companys performance. Morgan Stanley indicated that ON Semiconductor Corporations overall performance in the second quarter was basically in line with market expectations, while the guidance for the third quarter slightly exceeded expectations, also mainly benefiting from the growth in AI data center demand. The firm noted, in line with industry trends, that ON Semiconductor Corporation management mentioned continuous expansion in industrial market demand, strong growth in data center business, and overall stability in the automotive segment, which continues to benefit from increasing chip content per vehicle. It's worth noting that Morgan Stanley stated that some of the companys capacities this quarter have shifted from automotive customers to AI data center (AIDC) solutions, but this situation is expected to normalize over the coming quarters. Simultaneously, to meet growing demand, the companys capacity utilization continues to improve, and it maintains margins through price adjustments and targeted pricing on products experiencing local supply-demand imbalances. Furthermore, customers have begun to lock in product supplies for 2027 to 2028 in advance, further enhancing the visibility of the company's orders for the coming years and strengthening market confidence in its long-term growth prospects.