What Happened?
Shares of analog chips maker onsemi (NASDAQ: ON) jumped 9.9% in the afternoon session after positive sentiment swept through the semiconductor industry as Broadcom announced a partnership with OpenAI to develop custom AI accelerators. The news lifted shares of fellow chipmakers, including onsemi. The collaboration between Broadcom and the creator of ChatGPT caused a rally across the sector, with investors showing renewed optimism about the demand for artificial intelligence hardware. Contributing to the positive mood, investor fears also seemed to ease after a more conciliatory tone regarding trade relations between the U.S. and China emerged, helping chip stocks rebound from a selloff during the previous trading session.
The shares closed the day at $50.09, up 9.6% from previous close.
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What Is The Market Telling Us
onsemi’s shares are very volatile and have had 29 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 3 days ago when the stock dropped 5.6% on the news that President Donald Trump threatened to impose 'massive' new tariffs on Chinese goods. President Donald Trump's threat of "massive" new tariffs on Chinese goods sent shockwaves through the market, directly impacting chipmakers like Nvidia and AMD. Trump noted China's tightening controls on rare earth metals, which are vital components in many technology products from electric vehicles to defense systems.
Compounding the pressure, Beijing has reportedly initiated its own countermeasures. These include tightening export controls on crucial raw materials such as rare earths and launching an antimonopoly investigation into chip giant Qualcomm. Furthermore, reports indicate that Chinese customs officials are now conducting stringent checks on semiconductor shipments arriving at ports, specifically targeting certain high-end chips. This escalating back-and-forth creates significant uncertainty for the semiconductor industry, which relies heavily on complex global supply chains and access to international markets, leading to a broad sell-off across the sector.
onsemi is down 18.8% since the beginning of the year, and at $50.11 per share, it is trading 32.9% below its 52-week high of $74.70 from October 2024. Investors who bought $1,000 worth of onsemi’s shares 5 years ago would now be looking at an investment worth $1,934.
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