We recently compiled a list of the 8 Most Undervalued EV Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where ON Semiconductor Corporation (NASDAQ:ON) stands against the other undervalued EV stocks.

In 2024, the worldwide EV (electric vehicle) market value was roughly $1.32 trillion, as reported by Grand View Research, and it is expected to expand at a CAGR 32.5% between 2025 and 2030. Worldwide governmental rules and rewards are boosting EV sales. Numerous nations enact strict pollution laws and give rebates, tax cuts, and other benefits to buyers and producers, which pushes a change from gas-powered cars to electric ones. Furthermore, battery tech gains are improving EV range, power, and cost. New ideas like solid-state cells and better lithium-ion cells cut costs and boost energy storage, thus making EVs more attractive.

The EV sector navigated a turbulent 2024 due to macroeconomic pressures. Tradu recently reported that elevated inflation and surging interest rates globally constricted consumer spending, particularly on high-value items like EVs. This economic strain translated into a noticeable deceleration in battery electric vehicle (BEV) sales across key markets, notably Europe and the US. In Europe, BEV registrations experienced a decline, while hybrid vehicle sales surged. This reflected a consumer shift towards more affordable and range-extended options. The US market, while still growing, witnessed a slowdown compared to the previous year’s expansion. China, however, grew, with new energy vehicle (NEV) sales, which included BEVs, plug-in hybrids, and fuel cell vehicles, and surpassed 50% of total sales. This regional disparity underscored the varied pace of EV adoption worldwide.

Entering 2025, the EV industry anticipates a year of transition, marked by both challenges and opportunities. A risk lies in potential policy shifts, particularly in the US, where a change in administration could jeopardize existing EV incentives and regulations. The potential repeal of the federal tax credit, for instance, could impact EV affordability and demand. Furthermore, trade tensions, especially between China and Western nations, pose hurdles to market access. Increased tariffs and import restrictions could disrupt supply chains and limit consumer choice. However, there’s optimism for improved macroeconomic conditions. As inflationary pressures subside and central banks begin to lower interest rates, EV affordability is expected to improve. Moreover, the long-term trajectory towards electrification, driven by emission regulations and industry investments, appears irreversible.

A pivotal factor influencing EV adoption in 2025 will be the introduction of more affordable models. Recognizing the need to expand their customer base, major automakers are developing sub-$30,000 EVs. Chinese manufacturers, using their cost advantages and established supply chains, will play a role in this segment and offer competitive pricing and a wider range of models. The availability of affordable EVs is expected to be a major catalyst for market growth. Additionally, the advancements in autonomous driving technology are anticipated to revive the EV sector. While regulatory hurdles and safety concerns remain, 2025 could witness accelerated deployment of autonomous driving features. This will enhance the overall user experience and expand the potential applications of EVs. The convergence of electrification and autonomy will reshape the automotive landscape and drive innovation.

Our Methodology

We sifted through online rankings and stock screeners to compile a list of the top EV stocks that had a forward P/E ratio under 20. We then selected the 8 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q4 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 1000 elite money managers.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

ON Semiconductor Corporation (NASDAQ:ON)

Forward P/E Ratio as of March 7: 17.21

Number of Hedge Fund Holders: 52

ON Semiconductor Corporation (NASDAQ:ON) provides components for the EV industry and specializes in intelligent sensing and power solutions. Through its segments, it offers semiconductors critical for power management, analog and mixed-signal processing, and intelligent sensing. All of these are vital for the functionality and efficiency of EVs and related infrastructure.

The company’s EV segment is driven by silicon carbide (SiC) technology, which showed growth in Q4 2024. Automotive revenue increased 8% sequentially, with China leading at an 18% rise. However, the company is seeing EV adoption slowdowns in other regions and is monitoring tax credit and infrastructure uncertainties. SiC revenue grew sequentially in Q4, with a 22% increase in H2 2024 over H1. The acquisition of Corbus SiC JFET business strengthens ON Semiconductor Corporation (NASDAQ:ON)’s position, especially in AI data centers and EV applications.

On February 12, Needham reduced the price target on this company to $57 from $66, but maintained a Buy rating. This sentiment came from the weaker-than-expected Q1 2025 guidance due to ongoing demand softness and excess inventory in the automotive sector, which is projected to decline by 25% due to a slowdown in China. Despite market uncertainties, ON Semiconductor Corporation (NASDAQ:ON) is committed to its long-term EV strategy. It’s rationalizing its manufacturing footprint via the Fabrite strategy. This is an optimization plan by reducing excess capacity to improve cost efficiency.

Alger Mid Cap Growth Fund maintained a long-term positive outlook on the company and stated the following regarding ON Semiconductor Corporation (NASDAQ:ON) in its first quarter 2024 investor letter:

“ON Semiconductor Corporation (NASDAQ:ON) specializes in designing, marketing, and manufacturing a range of semiconductors, including analog, discrete, and data management types, with an emphasis on power semiconductors. The company has a global operational and sales presence, catering to key electronics sectors such as computing, wireless communications, networking, automotive, industrial, and consumer electronics. During the quarter, the company reported fiscal fourth quarter results, where revenues and earnings met analyst estimates. While the company has executed well compared to other automotive and analog semiconductors, shares detracted from performance after management lowered their fiscal first quarter guidance, citing near-term industry headwinds. While the company is navigating a challenging operating environment with an ongoing inventory correction and EV demand weakness, we believe the company has the potential to be a strong secular grower over the long- term.”

Overall ON ranks 2nd on our list of the most undervalued EV stocks to buy according to hedge funds. While we acknowledge the potential of ON as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ON but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.