14 AI Stocks Making Moves on Wall Street: Nvidia, Micron, and More

12. ON Semiconductor Corporation (NASDAQ:ON)

Number of Hedge Fund Holders: 58

Recently, ON Semiconductor was in the news related to announced plans for buying Synaptics,  an American neural network technologies and computer-to-human interface devices development company, for an estimated $7 billion, its largest acquisition ever. However, one Wall Street firm isn’t enthusiastic about it.

On June 26, TD Cowen analyst Joshua Buchalter downgraded the stock from Buy to Hold with a price target of $110.00. The firm is negative on the said acquisition, believing that it is going to add complexity and distract it from the core auto/DC growth story.

We downgrade ON to Hold following its announced plans to acquire Synaptics. We believe in the organic auto/DC growth and cap return story but think the deal adds complexity to an already complicated model reliant on loadings to drive EPS. +>100% YTD and at ~25x our 2027E, we think shares are fairly valued. We look forward to the Sept AD for more details on onsemi’s long-term vision. Hold, $110 PT.

Considering the growing edge in Synaptic’s AI/Robotics business, the firm sees the deal as a distraction for onsemi investors away from its main automotive and data center growth strategy. It believes that the deal will “muddy” the narrative due to Synaptic’s exposure to “consumer and wireless markets.”

We think onsemi’s lack of MCU/SoC processing expertise has been a gap in the portfolio versus peers, but we worry Synaptics’ NPU processors—largely targeting edge and embedded AI applications—may be too niche of an asset to serve as onsemi’s beachhead to compete with tenured diversified players that are not sitting idly.

ON Semiconductor Corporation (NASDAQ:ON), founded in 1999 and headquartered in Scottsdale, Arizona, delivers intelligent power and sensing solutions, serving automotive and industrial markets.