AI Power Semis: BofA names TXN, ADI, and ON as top picks for 800V era

Investing.com -- Bank of America highlighted Texas Instruments (NASDAQ: TXN), Analog Devices (NASDAQ: ADI), and ON Semiconductor (NASDAQ: ON) as top picks in the AI power semiconductor sector, citing underappreciated multi-year content gains as core industrial and auto markets turn from headwinds to cyclical tailwinds.

The firm noted that while shares have rallied recently, with Texas Instruments up 59% quarter-to-date, Analog Devices up 25%, and ON Semiconductor up 88%, potential content gains may still be underestimated in Street estimates.

For Texas Instruments, BofA raised its price objective to $370 from $320, based on 40x CY27 price-to-earnings ratio. The firm said TXN holds the largest data center business in the analog semiconductor space at approximately $1.5 billion in sales for CY25, representing 64% year-over-year growth. The business grew 90% year-over-year in Q1, primarily from general-purpose amplifiers, clocking, and voltage references. BofA projects TXN's data center opportunity could reach approximately $4.5 billion by CY28, or up to 18% of overall sales, up from roughly 12% currently.

Analog Devices currently has a $2 billion AI exposure run-rate, with approximately $1.2 billion in core data center and roughly 40% in automated test equipment. Optics and power each represent 50% of sales. One third of power revenue comes from protection, where ADI holds a leading share position, while another third comes from power control. BofA estimates AI sales, excluding ATE, could reach $3.3 billion by CY28, or up to 17% of total sales.

For ON Semiconductor, BofA raised its price objective to $138 from $115, based on 32x CY27 price-to-earnings ratio. AI sales currently represent approximately 4% of mix but have doubled year-over-year, exceeding a $250 million annual run-rate. The firm projects ON's AI sales could reach $1.6 billion by CY28, representing more than 6x growth and nearly 20% of sales. BofA cited improving China electric vehicle trends in the second half as an additional tailwind, noting ON's 55% share in that market.

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