Baird raises ON Semiconductor target to $108, keeps Neutral rating

ON Semiconductor Corp (NASDAQ: ON) posted stronger‑than‑expected second‑quarter earnings and raised its third‑quarter guidance, prompting analyst Tristan Gerra of Robert W. Baird to lift his price target to $108 from $100 while keeping a Neutral rating. The company’s CEO, Hassane El‑Khoury, confirmed that AI data‑center revenue is on track to more than double by 2026, and non‑GAAP gross margin for the quarter is expected to rise to 40‑42 % from 39.3 % in the previous period.

Gerra cited several drivers of optimism. AI data‑center demand is accelerating, and ON’s presence in industrial, electric‑vehicle and Chinese markets is strengthening. Factory utilization has improved and the product mix is shifting toward higher‑margin items, which could push gross margins above 50 % during the current cycle. The company’s guidance for the next quarter supports this view, and the management team highlighted continued momentum in key growth segments.

Despite the upbeat outlook, Gerra raised concerns about market‑share erosion in industrial, automotive and analog segments. Competitors such as Texas Instruments and STMicroelectronics grew revenue at roughly three times ON’s rate in the same period, with Texas Instruments’ analog business expanding 26 % year over year. ON’s limited internal manufacturing capacity could become a disadvantage if supply conditions tighten, further constraining its ability to meet demand and protect margins.

Investor sentiment remains mixed. Hedge fund ownership fell from 63 holdings at the end of Q4 2025 to 58 at the end of Q1 2026, but total hedge fund holdings increased slightly from $1.61 billion to $1.64 billion, suggesting some funds are adding positions while others are reducing exposure. Short interest stands at 11.05 %, indicating that a significant portion of investors still bet against the stock. The coming quarters will test whether ON can capture AI growth while mitigating competitive pressures and expanding its manufacturing footprint.