If you can tolerate some near-term risk, then ON Semiconductor (ON -1.93%) could be an excellent stock to buy and hold for the long term. Here's why the specialty chipmaker is a good addition to an enterprising investor's portfolio.
What does ON Semiconductor do?
The company provides power and sensing solutions to the automotive sector (55% of 2024 revenue), the industrial sector (25%), and what management categorizes as "other" (20%). Its product portfolio includes power semiconductors, intelligent sensors (including image sensors), and analog and mixed-signal integrated circuits for electronic systems. Within the automotive industry, it has key and growing exposure to silicon carbide (SiC) chips used in electric vehicles (EVs), as well as exposure to EV charging, industrial automation, machine vision, and smart buildings and infrastructure in its industrial segment.
Finally, within "other," it includes exposure to AI/data center spending and a wide range of consumer electronics products. For reference, it's also an Nvidia partner in developing the next generation of data centers.
Long-term growth, near-term risk
There are several aspects to appreciate about the company's long-term growth opportunities. However, in the near term, the slowdown in EV investment (triggered by high interest rates curtailing auto sales and ongoing losses by automakers on EVs) and an industrial slowdown are hurting demand. As previously discussed, the company's sales have been slowing since the end of 2023.

Image source: Getty Images.
Still, the reality is that EVs are the long-term growth market in the auto industry, and that's why Ford Motor Company and others are committed to making multibillion-dollar investments to capture market share. With ON Semiconductor stock trading on slightly over 14 times the Wall Street analyst consensus for free cash flow in 2025, , there's a margin of safety for error in its valuation over the near term, and plenty of growth potential over the long term. That makes it a highly attractive stock to buy on a risk/reward basis.