ON Semiconductor Targets AI Power Growth

ON Semiconductor (NASDAQ:ON) is pivoting its strategic focus toward artificial intelligence infrastructure, identifying power density as the critical bottleneck for next-generation data centers. Management asserts that the challenge has shifted from compute and memory to delivering higher power in compact spaces with improved thermal efficiency. This positioning allows the company to leverage its established strength in power and sensing technologies to capture a significant share of the emerging AI hardware market.

According to a report by GN stocks/chips, the company expects its AI data center revenue to grow at a compound annual rate exceeding 50% between 2026 and 2030. Revenue from this segment is projected to rise from over $500 million in 2026 to more than $2.5 billion by 2030. The expansion strategy targets the entire grid-to-rack-to-chip power chain, responding to the escalating electricity demands of AI systems.

Revenue Growth From AI Infrastructure

The company anticipates a substantial increase in its content value per AI rack. Current content per rack stands at approximately $15,000, but ON Semiconductor forecasts this figure will climb to roughly $115,000 by 2030. A key driver for this growth is a newly secured Vcore design win, with revenue contributions expected to commence by the end of 2026. This design win underscores the firm's expanding role in high-power applications beyond traditional automotive and industrial sectors.

Financial Targets And Margin Outlook

Management has set aggressive financial targets for the 2026 to 2030 period, aiming for a 12% to 14% revenue compound annual growth rate. The company projects gross margins will reach approximately 53%, while operating margins are expected to hit roughly 38%. Free cash flow margins are targeted in the range of 30% to 35%. These metrics reflect a shift toward higher-margin product mixes driven by advanced power technologies and system-level solutions.

J.P. Morgan analysts estimate that these updated targets could support earnings per share of $10 to $11 by 2030. This projection exceeds the current Wall Street consensus of $8 per share. The firm highlighted that ON Semiconductor’s broader technology portfolio provides a diversified growth engine, reducing reliance on cyclical industrial markets and opening new avenues in physical AI and humanoid robotics.

Expansion Into Physical AI Applications

Beyond data centers, ON Semiconductor is positioning itself for the rise of physical AI, specifically in humanoid robotics. The company estimates that semiconductor content per humanoid robot could reach up to $900 by 2030. This opportunity stems from the need for precise power management and sensing capabilities in robotic systems. By integrating its power and sensing leadership, the firm aims to become a core supplier for the next generation of autonomous machines.