Key Moments
- Bank of America selected Texas Instruments, Analog Devices, and ON Semiconductor as preferred names in AI-focused power semiconductors, citing long-term growth in industrial and auto markets.
- BofA lifted price objectives for Texas Instruments to $370 and ON Semiconductor to $138, reflecting expectations for strong AI-driven revenue expansion through CY28.
- All three companies are projected to see substantial AI-related sales growth by CY28, with BofA estimating data center and AI revenues could reach multibillion-dollar levels for TXN and ADI, and $1.6 billion for ON.
AI Power Semiconductors Move to the Forefront
Investing.com — Bank of America identified Texas Instruments (NASDAQ:TXN), Analog Devices (NASDAQ:ADI), and ON Semiconductor (NASDAQ:ON) as its leading picks within the AI power semiconductor space. The firm pointed to what it sees as undervalued, multi-year gains in chip content as core industrial and automotive markets shift from being a drag to becoming cyclical supports.
According to the firm, the trio has already enjoyed substantial share price appreciation in recent trading. Texas Instruments is up 59% quarter-to-date, Analog Devices has advanced 25%, and ON Semiconductor has climbed 88%. Despite these sharp moves, Bank of America believes the market is still underestimating the potential revenue contribution from AI-related content in these businesses.
Texas Instruments: Expanding AI Data Center Footprint
Bank of America increased its price objective on Texas Instruments to $370 from $320, using a 40x CY27 price-to-earnings multiple as the basis. The firm highlighted that TXN operates what it describes as the largest data center business in the analog semiconductor segment, with around $1.5 billion in sales projected for CY25. That figure would represent 64% year-over-year growth.
The data center business posted 90% year-over-year growth in Q1, driven mainly by general-purpose amplifiers, clocking products, and voltage references. Looking ahead, Bank of America forecasts that TXN’s data center opportunity could grow to approximately $4.5 billion by CY28. On that basis, data center revenue could account for up to 18% of total company sales, compared with roughly 12% at present.
| Texas Instruments – Data Center Metrics | Value |
|---|---|
| CY25 data center sales (projected) | $1.5 billion |
| CY25 year-over-year growth | 64% |
| Q1 year-over-year growth | 90% |
| CY28 data center opportunity (projected) | $4.5 billion |
| Data center share of total sales – current | ~12% |
| Data center share of total sales – CY28 (projected) | Up to 18% |
| BofA price objective | $370 (from $320) |
| Valuation basis | 40x CY27 P/E |
Analog Devices: Broad AI Exposure Across Power and Optics
Analog Devices is currently running at a $2 billion AI exposure rate, according to Bank of America. Approximately $1.2 billion of that comes from core data center activity, with around 40% tied to automated test equipment (ATE). Within this AI-related revenue base, optics and power each contribute 50% of sales.
Power revenue for ADI is diversified. One third comes from protection products, where the company is described as holding a leading share position, and another third comes from power control offerings. Bank of America estimates that ADI’s AI sales, excluding ATE, could total $3.3 billion by CY28, which would account for as much as 17% of the company’s overall revenue.
| Analog Devices – AI Exposure Detail | Value |
|---|---|
| Current AI exposure run-rate | $2 billion |
| Core data center portion | ~$1.2 billion |
| Share from automated test equipment (ATE) | ~40% |
| Optics share of AI-related sales | 50% |
| Power share of AI-related sales | 50% |
| Power revenue from protection | One third |
| Power revenue from power control | One third |
| CY28 AI sales excluding ATE (projected) | $3.3 billion |
| CY28 AI share of total sales (projected) | Up to 17% |
ON Semiconductor: Rapid AI Growth and EV Tailwinds
For ON Semiconductor, Bank of America raised its price objective to $138 from $115, applying a 32x CY27 price-to-earnings multiple. AI-related revenue currently accounts for about 4% of the company’s mix, but has doubled year-over-year and now exceeds a $250 million annual run-rate.
The firm projects that ON’s AI sales could climb to $1.6 billion by CY28, implying more than 6x growth and approaching 20% of company revenue. Bank of America also pointed to strengthening China electric vehicle dynamics in the second half as an additional positive factor, and noted ON’s 55% share in that market.
| ON Semiconductor – AI and EV Highlights | Value |
|---|---|
| BofA price objective | $138 (from $115) |
| Valuation basis | 32x CY27 P/E |
| Current AI sales mix | ~4% |
| Current AI annual run-rate | >$250 million |
| Year-over-year AI sales growth | 2x |
| CY28 AI sales projection | $1.6 billion |
| CY28 AI share of total sales (projected) | Nearly 20% |
| China EV market share | 55% |
Valuation Context and Market Backdrop
In summarizing its stance, Bank of America argued that the long-term content gains from AI and the ongoing shift in industrial and automotive cycles are not yet fully embedded in consensus forecasts for Texas Instruments, Analog Devices, and ON Semiconductor. The firm highlighted the recent share price strength, yet maintains that the magnitude and duration of AI-related growth potential remain underappreciated by the broader market.
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