Are you interested in investing in semiconductor stocks but unsure which one is the best option for you? While Nvidia is a popular choice, ON Semiconductor may be a better investment opportunity for those looking to take on some near-term risk. Here’s why ON Semiconductor (NASDAQ: ON) could be the right choice for you.
Semiconductor stocks are known for their cyclicality, making them early indicators of market trends. While Nvidia has seen success in AI and high-performance computing, ON Semiconductor has focused on industrial and automotive markets, which have faced challenges recently. However, ON Semiconductor has been strategically positioned to capitalize on long-term growth opportunities, especially in the silicon carbide market.
Management at ON Semiconductor has made significant investments in silicon carbide operations, offering benefits over traditional silicon chips, particularly for electric vehicles (EVs). The company has also targeted other growth markets such as factory automation, EV charging, renewable energy infrastructure, 5G, and advanced driver assistance systems (ADAS).
Despite the current challenges in its end markets, ON Semiconductor’s valuation multiples are attractive, trading at 18.3 times estimated earnings. The company has the potential to recover in line with traditional cyclicality, making it a compelling investment for enterprising investors.
If you are willing to tolerate some near-term risk, ON Semiconductor could be a stock worth considering. With the EV market poised for growth and the company’s positioning in emerging technologies, there is potential for long-term success.
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