onsemi vs. STMicroelectronics: Which EV Chip Stock Is the Better Buy?

The electrification of transportation continues to create long-term opportunities for semiconductor companies specializing in power management, silicon carbide (SiC), sensors and automotive microcontrollers. As global automakers transition toward electric vehicles (EVs), software-defined vehicles and higher-voltage architectures, suppliers with differentiated automotive chip portfolios are well positioned to benefit. Among the leading players are onsemi ON and STMicroelectronics N.V. STM.Both companies have deep exposure to automotive semiconductors, growing AI-related opportunities and expanding silicon carbide portfolios. Both also delivered encouraging first-quarter 2026 updates that suggest the industry's downturn is easing. Yet their growth strategies, financial profiles and valuation differ meaningfully.Let's dive deep and closely compare the fundamentals of the two stocks to determine which one is the better investment now.The Case for onsemi Stockonsemi's investment case increasingly rests on its leadership in intelligent power solutions for electric vehicles and industrial applications. During the first quarter of 2026, management indicated that the company had moved beyond the cyclical trough as demand improved throughout the quarter. Revenues exceeded guidance, while operating leverage remained impressive as year-over-year operating income growth outpaced revenue growth by roughly two times. Gross margin expanded sequentially for the third straight quarter, reflecting benefits from cost optimization and a more focused product portfolio.The company's automotive franchise remains one of its biggest competitive strengths. onsemi continues to lead the industry's transition toward 900-volt EV architectures through its EliteSiC platform. Expanded collaborations with Geely and NIO reinforce its position among Chinese EV manufacturers, while new traction inverter wins and production shipments of Treo Ethernet solutions support growing adoption of software-defined vehicles. Management also highlighted that silicon carbide solutions powered approximately 55% of new EV models showcased at the 2026 Beijing Auto Show. Beyond EVs, AI data center revenue more than doubled year over year and increased more than 30% sequentially, creating another high-growth driver.Another important advantage is profitability. Even after the industry downturn, onsemi continues to generate significantly stronger returns on invested capital than most automotive semiconductor peers. Management also continues to aggressively return cash to shareholders through buybacks while maintaining healthy free cash flow.The challenges largely relate to cyclical automotive demand and continued pricing pressure across portions of the industrial market. Although recovery has started, EV demand remains uneven across regions, and silicon carbide competition continues to intensify. Nevertheless, onsemi appears better positioned because of its disciplined manufacturing strategy, improving operating leverage and growing exposure to AI infrastructure alongside automotive.The Case for STMicroelectronics StockSTMicroelectronics offers one of the industry's broadest automotive and industrial semiconductor portfolios, spanning power devices, microcontrollers, sensors and analog products. Following a difficult 2025, the company's first-quarter 2026 results suggested demand is steadily improving. Revenues increased 23% year over year, supported by stronger automotive, industrial and personal electronics demand. Distribution inventories have largely normalized, while bookings strengthened across all end markets with book-to-bill comfortably above one.STMicroelectronics continues to invest aggressively in technologies supporting next-generation mobility. During the quarter, the company secured automotive design wins across electric vehicles, hybrid vehicles and conventional vehicles covering onboard chargers, DC-DC converters, powertrain electronics and vehicle control systems. Its acquisition of NXP's MEMS sensor business also strengthens its automotive sensing capabilities. Meanwhile, management expects AI data center revenues to exceed $500 million during 2026 and surpass $1 billion in 2027, highlighting an emerging growth opportunity beyond automotive. The recently announced collaboration with NVIDIA for robotics further expands its exposure to physical AI.However, profitability remains a key weakness. Although margins improved from last year, operating margins remain well below historical levels because of restructuring expenses, underutilized manufacturing capacity and ongoing transformation costs. Free cash flow was also temporarily pressured by the NXP MEMS acquisition. While these investments may strengthen long-term competitiveness, investors may need patience before meaningful earnings recovery materializes.Overall, STMicroelectronics offers stronger near-term revenue growth expectations and broad technology exposure but still faces execution risk as it works through its cost restructuring and manufacturing optimization initiatives.Momentum Has Been Strong Across the SectorBoth stocks have delivered exceptional returns during 2026 as investors increasingly priced in a recovery across automotive and industrial semiconductors.onsemi shares have surged 113.8% year to date, while STMicroelectronics stock has climbed an even stronger 177%. Both have comfortably outperformed the Zacks Computer and Technology sector's 15% gain and the S&P 500's 7.5% advance.ON vs STM Performance (YTD)Image Source: Zacks Investment ResearchThe rally also compares favorably with other automotive semiconductor peers such as Texas Instruments TXN and Microchip Technology MCHP, reflecting improving investor confidence in the EV semiconductor cycle. Texas Instruments and Microchip Technology gained 74.8% and 45.2% YTD, respectively.Despite STMicroelectronics' stronger recent price appreciation, onsemi's recovery has been supported by improving fundamentals, expanding AI data center exposure and strengthening automotive demand.onsemi Delivers Superior Capital EfficiencyReturn on invested capital (ROIC) strongly favors onsemi. Its trailing 12-month ROIC stands at 9.22%, significantly above STMicroelectronics' 1.24%. The higher ROIC reflects onsemi's superior capital allocation, stronger profitability and better operating efficiency, giving it a meaningful competitive advantage despite both companies operating in the same cyclical semiconductor market.ON vs STM ROIC (TTM)Image Source: Zacks Investment ResearchValuation Still Favors onsemiDespite both stocks' impressive rallies, valuation continues to favor onsemi. Based on the forward 12-month price-to-earnings ratio, onsemi trades at 31.28X earnings compared with STMicroelectronics at 37.57X. Investors are paying a higher premium for STM despite its lower profitability and weaker ROIC profile.ON vs STM Valuation (P/E F12M)Image Source: Zacks Investment ResearchPeers such as Texas Instruments and Microchip Technology are trading at 36.98X and 28.55X, respectively. Yet, onsemi offers the more attractive balance between valuation and profitability.The lower multiple, combined with stronger returns on invested capital and improving operating leverage, gives onsemi a valuation advantage.ON vs STM: Earnings Estimates Continue Moving HigherAnalysts have become increasingly optimistic about both companies, reflecting improving industry conditions.Over the past 60 days, the Zacks Consensus Estimate for onsemi's 2026 earnings has increased to $3.09 per share from $2.90. Current estimates imply 31.5% EPS growth on 8% revenue growth for 2026, followed by another 41.1% earnings increase and 10.5% revenue growth in 2027.Onsemi’s Estimate Revision TrendImage Source: Zacks Investment ResearchFor STMicroelectronics, the consensus estimate has risen to $1.17 from $1.09 over the past 30 days. Analysts expect 120.8% EPS growth alongside 21.6% revenue growth in 2026, followed by another 132.5% earnings increase on 15.9% revenue growth during 2027.STMicroelectronics’ Estimate Revision TrendImage Source: Zacks Investment ResearchAlthough STM's percentage growth appears much stronger, those gains are being measured from a significantly depressed earnings base following its cyclical downturn. onsemi's estimates reflect healthier underlying profitability and a more consistent earnings profile.Which EV Chip Stock Is the Better Buy?Both companies are positioned to benefit from rising semiconductor content in electric vehicles, software-defined vehicles and AI-enabled infrastructure. STMicroelectronics offers stronger projected earnings growth as demand recovers, supported by expanding AI programs, automotive design wins and manufacturing investments. However, its lower profitability, weaker ROIC and higher valuation suggest much of that recovery still depends on successful execution.onsemi appears to offer the better risk-reward balance. The company combines improving automotive demand, leadership in silicon carbide and 900-volt EV platforms, rapidly expanding AI data center exposure, stronger capital efficiency and a more attractive valuation. Importantly, onsemi also carries a more favorable Zacks Rank #2 (Buy) compared with STMicroelectronics' Zacks Rank #3 (Hold). Considering its superior profitability, healthier returns on capital, attractive valuation and stronger earnings quality, onsemi appears to hold better upside potential for long-term investors despite STM's faster near-term earnings rebound. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Beyond Nvidia: AI's Second Wave Is HereThe AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. AI’s second wave is moving from infrastructure to implementation and these companies are at the forefront of this transition, positioned to become what Amazon and Google were to the internet era.See Stocks Now >>This article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks