By Nigam Arora
Editors Note: This was published in ZYX Buy yesterday for paying members.
Trade Around Position
This is a signal for a trade around position in a semiconductor company ON. A trade around position is separate and distinct from the core position. A trade around position is a technique used by billionaires and hedge funds that can dramatically increase your returns and reduce your risk when practiced consistently over a number of years.
The Catalyst Is Tomorrow’s Investor Day
ON Semiconductor is holding its Investor Day tomorrow, September 16.
The stock has recently come under pressure as investors have become concerned about a potential slowdown in AI datacenter spending. Weakness in EVs and the broader automotive semiconductor market has also weighed on sentiment.
Investor Day gives management an opportunity to directly address these concerns and, more importantly, lay out the longer-term growth story.
AI Data Centers Remain The Key
AI data centers are one of ON’s fastest-growing businesses. ON has previously said it expects its AI data center revenue to more than double in 2026.
ON is benefiting from the enormous amount of power required by AI data centers. As AI racks become increasingly power hungry and data centers move toward higher-voltage power architectures, ON’s expertise in power semiconductors becomes increasingly valuable.
Tomorrow, investors will be looking for evidence that this growth remains intact.
If AI data center spending continues to grow strongly, ON has significant upside potential.
If the data center buildout comes to a halt, all bets are off.
Watch The 800-Volt Opportunity
One of the most important areas to watch at Investor Day will be the transition toward 800-volt data center power architectures.
Higher-voltage architectures potentially increase the semiconductor content opportunity for ON and play directly into the company’s strength in power conversion.
We will be watching closely for new information on design wins, customers, timing, and the size of the revenue opportunity.
EV Weakness Is A Headwind — But It Can Turn Into A Tailwind
ON also has significant exposure to automotive and EVs.
The slowdown in EV growth has hurt ON, but investors need to distinguish between a cyclical slowdown and a permanent impairment of the business.
If EV demand begins recovering while AI data center revenue continues growing, ON could benefit from two important drivers at the same time.
Synaptics Opens A Second AI Front
The pending acquisition of Synaptics (SYNA) is controversial because some investors worry that ON is taking its eye off the booming AI data center opportunity.
We see another possibility.
Synaptics gives ON capabilities in connected compute, connectivity, and human-machine interfaces that complement ON’s strengths in power and sensing.
The combination positions ON for physical AI.
Physical AI Means Robots And Intelligent Machines
AI is beginning to move from software and data centers into the physical world. Examples include:
- Robots.
- Humanoids.
- Autonomous machines.
- Smart factories.
- Intelligent vehicles.
These systems need to sense, decide, and act.
ON already has important pieces of the sensing and power side. Synaptics adds compute and connectivity.
If management can demonstrate tomorrow that the Synaptics acquisition gives ON a meaningful position in robotics and physical AI, investors may begin looking at the transaction very differently.
Margins Will Also Matter
The other major issue is profitability.
ON’s current margins remain well below the long-term targets management previously laid out.
At Investor Day, we will be looking for a credible roadmap showing how higher factory utilization, restructuring, improving product mix, AI data centers, and eventually Synaptics can drive margins materially higher.
What We Are Watching Tomorrow
The most important questions are straightforward:
- Does AI data-center growth remain strong?
- Is the 800-volt transition making ON’s opportunity larger?
- When does EV weakness begin to improve?
- Can management provide a credible path to substantially higher margins?
- And can ON demonstrate that Synaptics turns the company into a serious player in physical AI and robotics, rather than simply making ON a larger semiconductor company?
Investor Day could provide important answers.
The setup is compelling because expectations have come down at the same time that ON potentially has three major future growth drivers.
Zones
The buy zone for the trade around position is $(To see the locked content, please take a 30 day free trial) – $***.
The maximum recommended quantity is ***%.
The mental stop zone is $*** – $***.
The target zone will depend on what is said at Investor Day.
Investor Days are usually positive, but once in a while, an Investor Day can trigger selling. For this reason, it is important to review your quantity held for the trade around position as well as your core position.
Those who are holding a large core position in ON may review and reduce their quantity held in the trade around position.
To take a free 30-day trial to paid services to gain access to more opportunities, please click here.
This post was just published on ZYX Buy Change Alert.
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Nigam Arora
Nigam Arora is known for his accurate stock market calls. Nigam is a distinguished master of the macro. He is a popular columnist with over 100 million page views, an engineer, and nuclear physicist by background. Nigam has founded two Inc. 500 fastest growing companies and has been involved in over 50 entrepreneurial ventures. He is the developer of Theory ZYX of Successful Change Management and is the author of the book on Theory ZYX, as well as the developer of the ZYX Change Method for Investing.
