Sam Badawi
Stock Analyst, Creator of Origins of Alpha & Quarterly Conviction
Onsemi's Synaptics deal matters more than most investors realize, marking a major move into physical AI through Synaptics' edge AI compute, connectivity and software, with far greater exposure to robotics and intelligent edge systems. Shares fell 21% on the all-stock structure's dilution, a short-term negative against long-term strategic benefits; an all-cash or mixed deal would have been preferable. x.com x.comÂ
Onsemi's $7B all-stock acquisition of Synaptics turns it into a multi-theme stock, adding direct robotics exposure where it previously had only indirect exposure. Synaptics holders receive 1.35 Onsemi shares each, a 27% premium, and will own about 12% of the combined company. The deal dilutes Onsemi holders but is expected to close by mid-2027 and add to non-GAAP EPS within 18 months after closing. x.com x.com x.comÂ
ON Semiconductor is back to reasonable multiples after Friday's sell-off tied to Synaptics. Per Mizuho, as many as six analog OEMs are raising prices into the second half of 2026 as demand for select components stays very tight, with NXP, Texas Instruments, Infineon, STMicro and others noting increases of up to 5-30% as AI servers drive demand. x.comÂ
Synaptics is a buy below $65 in this correction for its edge AI chips for IoT and automotive. For investors under 35, the broader market correction is a gift. x.comÂ
The still-robust AI wave will inevitably drive physical AI forward, making Ouster's lidar, cameras and software stack increasingly critical. SK Hynix's strong earnings show that momentum is far from over; physical AI still has substantial runway and has not seen the hype of other AI trades. x.comÂ
onsemi's inventory correction is ending while its AI data center business surges, yet the stock is about 46% below its June 3 high. Distribution inventory fell to 10.1 weeks, fab utilization rose to 83% and lead times stretched from 27 to 32 weeks. The company expects AI data center revenue to more than double in 2026, and management targets another doubling in 2027. onsemi says power content per AI rack can rise from about $15,000 to roughly $115,000 as racks move to high-voltage designs. x.com … Show more
Synaptics remains a cheap edge-computing play at 14x next-twelve-month earnings for 23% expected growth in FY26. It is not a buy this week while everything is rising, but it is among the names that would offer a huge opportunity if the S&P 500 calms down and drops back toward the 662 level. x.comÂ
Onsemi's AI data center business is no longer a side story: revenue there is now expected to more than double in 2026, with growth across the whole power tree. Management is shifting capacity from autos to AI, utilization rose from 77% to 83% with most of the margin benefit due in Q4 and 2027, a second round of price increases is holding, and lead times stretched to 32 weeks with visibility into 2027-2028. Content per rack is projected to rise from about $15k today to $115k by 2030. x.comÂ
onsemi's revised all-cash deal avoids equity dilution while keeping debt manageable, after the price was cut by $1.3B. Even at 7-7.5% financing, incremental interest of $170-180M lifts total interest to $250-270M against $1.7B of EBITDA, covered 6-7x, instead of diluting 12% of the company. Net debt stays under 1x EBITDA and the debt can be repaid in three years. @EricJhonsa notes higher yields raise financing costs for an all-cash deal. x.comÂ
Synaptics stands to benefit as AI moves out of data centers into physical devices, a read-through from Micron's results. Micron said L2+ vehicles carry 5x the memory and storage of average cars and humanoid robots carry 10x that of L2+ vehicles. Physical AI needs local compute, sensing, connectivity and low-power inference, which is Synaptics' lane. x.comÂ
Physical AI's reliance on semiconductors across its technology layers could make it the next theme to drive another rally in semiconductor stocks. Micron recently echoed this view. There is still much to learn about the field. x.comÂ
These ten semiconductor stocks look cheap because each has a PEG ratio near or below 1, meaning growth outpaces valuation. Nvidia's Q1 revenue rose 85% and AMD's 38% with MI350 commitments; Broadcom's AI chip revenue rose 143% with a $73B AI backlog; Marvell's custom silicon doubled. Sandisk has $42B in contracted backlog, Micron's HBM is sold out through 2026, and Coherent, Credo and Applied Optoelectronics ride AI optics demand. ON Semiconductor is the slow-growth value play. x.com x.com x.com … Show more
