onsemi Projects AI Data Center Revenue to Double by 2026
The chipmaker is pivoting toward 'Physical AI' and data center power units to reverse a multi-year revenue downshift.
onsemi is accelerating its push into AI data center infrastructure, with management projecting that revenue from this segment will more than double in 2026 compared to 2025. The move signals a strategic pivot as the company seeks to capitalize on the surging demand for power units and connectivity required to sustain the AI era.
Recent financial data indicates a sharp recovery in specific segments. The company's "other" revenue category grew 34% sequentially in the second quarter, reaching $400 million, a spike driven primarily by demand from AI data centers. Looking ahead, onsemi has set its third-quarter revenue guidance between $1.65 billion and $1.75 billion, with projected gross margins ranging from 40% to 42%.
The Shift to Physical AI
Historically, onsemi centered its business on automotive and industrial markets, with a heavy emphasis on Silicon Carbide (SiC) for electric vehicles. However, the company is now expanding its footprint into "Physical AI," which encompasses Edge AI compute and connectivity. This transition reflects a broader industry trend where semiconductor demand is migrating from centralized cloud environments toward the edge of the network, requiring more efficient power management at the hardware level.
Market Implications
This pivot toward AI data center power units and 800V EV architectures is a critical revenue driver for the next 12 to 24 months. If the company successfully scales its vertically integrated SiC manufacturing and meets the rising power demands of AI infrastructure, it may achieve significant margin expansion. Such a shift could lead to a valuation rerating, potentially closing the current gap between onsemi and its industry peers who have already seen AI-driven premiums.
Valuation and Outlook
While the company has faced a multi-year revenue downshift, the recent snapback in AI-related demand suggests a turning point. Valuation estimates vary among analysts; Undervalued.ai estimates a peer-based fair value of $86.23, while Morningstar maintains an estimate of $97 per share. Investors are now watching to see if the company can sustain this momentum in the data center space while navigating the inherent volatility of the automotive market and the transition to next-generation power electronics.