Which Semiconductor Stocks Deserve Your Investment: The Case for a Decade-Long Hold

When evaluating which semiconductor stocks to buy for long-term wealth building, the market presents both obvious headwinds and compelling hidden opportunities. Among the candidates worthy of serious consideration is ON Semiconductor (NASDAQ: ON), a company operating at the intersection of automotive transformation, industrial modernization, and the data center revolution. While short-term market conditions present challenges, the fundamental thesis supporting this semiconductor stock’s appeal remains robust for investors with a multi-year horizon.

Understanding ON Semiconductor’s Business Model and Market Position

ON Semiconductor operates as a diversified semiconductor provider with exposure to three critical market segments: automotive solutions (55% of 2024 revenue), industrial applications (25%), and consumer/other electronics including AI and data center infrastructure (20%). The company’s product architecture spans power semiconductors, intelligent sensing technology including advanced image sensors, and analog/mixed-signal integrated circuits.

Within the automotive vertical, the company has established meaningful participation in silicon carbide (SiC) semiconductor technology—the critical enabling component for modern electric vehicles. Beyond EV powertrains, ON Semiconductor provides solutions for EV charging infrastructure, machine vision systems, and smart building technologies. This diversification across adjacent automotive niches creates multiple revenue streams within a single industry vertical.

The industrial segment similarly showcases broad exposure to factory automation, IoT-enabled systems, and emerging infrastructure applications. Perhaps most intriguingly, the company’s participation in next-generation data center development positions it as an Nvidia partner in launching the 2027-era data center infrastructure wave. This exposure to the semiconductor stocks that benefit from artificial intelligence spending could provide outsized returns during the coming decade.

Near-Term Headwinds vs. Long-Term Tailwinds in Chip Demand

Like many semiconductor manufacturers, ON Semiconductor faces near-term demand pressures. The slowdown in electric vehicle adoption—driven by elevated interest rates suppressing auto sales and automaker profitability challenges in the EV transition—has created a cyclical headwind. Simultaneously, industrial end-market spending has decelerated. Sales momentum has slowed consistently since late 2023, creating what appears to be a challenging 12-24 month window.

However, this cyclical weakness represents a predictable phase rather than a structural decline. The automotive industry remains committed to electrification: Ford Motor Company and its peers continue investing tens of billions into EV manufacturing capacity. The competitive stakes are too high for legacy automakers to retreat. Similarly, artificial intelligence infrastructure spending shows no signs of abating. Industrial automation investments will eventually recover as the economic cycle normalizes.

From a market timing perspective, cyclical weakness in semiconductor stocks often creates the best buying opportunities for patient investors. The industry’s structural growth drivers—EV adoption acceleration, industrial digital transformation, and data center proliferation—remain intact.

Why the Valuation Makes ON Semiconductor an Attractive Entry Point

At current valuation levels, ON Semiconductor trades at approximately 14 times the Wall Street consensus estimate for free cash flow in 2025, providing substantial margin for error. This valuation offers meaningful downside protection against forecast disappointments while preserving significant upside potential if the company executes during the cyclical recovery.

Semiconductor stocks trading near 14x free cash flow multiples historically have provided compelling risk-adjusted returns, particularly when the underlying business operates in growth markets. The combination of reasonable valuation and exposure to multiple high-growth end markets creates an asymmetric payoff—limited downside in a disappointing scenario, substantial upside in a base case scenario.

The Path Forward: Data Centers and Industry Automation as Growth Engines

Looking ahead to the 2027-2030 period, ON Semiconductor benefits from structural tailwinds that should support sustained earnings growth. The next generation of data center architectures launching in 2027 will require enhanced power management and sensing capabilities—exactly where ON Semiconductor possesses engineering expertise and manufacturing partnerships.

Industrial automation investments, temporarily depressed by economic uncertainty, will resume as companies modernize production facilities and embrace robotics and AI-enhanced operations. The company’s positioning in machine vision, power distribution, and intelligent sensing positions it well to capture share in this multi-year upgrade cycle.

For investors seeking the best semiconductor stocks to own for a decade-long holding period, ON Semiconductor’s blend of current valuation attractiveness, multi-year end-market tailwinds, and technological positioning in high-growth applications presents a compelling case. The near-term cyclical challenges appear manageable compared to the long-term value creation potential. That asymmetry of risk and reward is precisely what distinguishes attractive long-term semiconductor investments from cyclical trading plays.