Analog chip stocks rebound as cycle turns on 3-year high bookings

Distributor inventories are back inside historical norms and bookings hit a three-year high, signaling the analog semiconductor cycle has turned after a two-year downturn.

Analog semis just flashed the clearest cycle-turn signal in three years. Bookings across the group reached their highest level since mid-2023, distributor days of inventory collapsed back inside historical ranges, and management teams from Chandler to San Jose are calling the trough in the same language. ON Semiconductor (ON) is up 69.24% year to date through July 10, and it is not even the best performer on this list.

"We are seeing structural demand recovery, not a pull-forward," Steve Sanghi, chief executive officer of Microchip Technology, said on the company's May earnings call. "The channel is still filling a supply chain deficit." Microchip, which went through the deepest inventory correction in the group, reported May-quarter revenue of $1.311 billion, up 35.1% from a year earlier, and guided for $1.442 billion to $1.469 billion in the current quarter.

The recovery is broad-based across end markets. Analog Devices posted May-quarter revenue of $3.62 billion, up 37.25% year over year, with adjusted operating margin of 49.0% — up 780 basis points. Chief Executive Officer Vincent Roche said industrial end markets "collectively have grown more than 40% in 2026" while still sitting well below prior cycle highs with lean channel inventories. NXP Semiconductors reported April-quarter revenue of $3.181 billion, up 12.2%, with free cash flow of $714 million, and guided for a June-quarter midpoint of $3.45 billion, up 18% year over year.

The cycle turn matters because analog semiconductors — chips that manage power, sense temperature, and convert signals — are a leading indicator for industrial production and automotive demand. Global chip sales reached $110.5 billion in April, up 11% from March and 93.9% from a year earlier, according to the Semiconductor Industry Association, which endorsed a forecast calling for $1.5 trillion in 2026 sales. Hyperscalers including Amazon, Alphabet, Meta and Microsoft are expected to spend roughly $700 billion on capital expenditures this year, according to Yahoo Finance estimates, adding a fresh AI-server power growth leg on top of the auto and industrial restock.

AI Server Power Content Adds a New Growth Layer

The most significant structural change in this cycle is the addition of AI data center revenue to companies that historically depended on auto and industrial demand. Monolithic Power Systems reported April-quarter revenue of $804.18 million, up 26.14% year over year, driven by Enterprise Data revenue of $262.8 million — up 97.7% and now 32.7% of total revenue. Management raised its Enterprise Data growth floor from 50% to 85% year-over-year growth for 2026 and increased its capacity target from $4 billion to $6 billion.

Chief Executive Officer Michael Hsing described the shift as a transformation "from chip-only supplier to full-service silicon-based solutions provider." Monolithic Power's monolithic integration approach and module-level power solutions have made it one of a small group of vendors qualified for hyperscaler GPU power racks.

ON Semiconductor is the transition play. The company's auto silicon carbide franchise — with design wins at Geely, NIO and a North American OEM — is stabilizing at the same time AI data center revenue is going vertical. Chief Executive Officer Hassane El-Khoury said on the May earnings call that the company has "moved beyond the cyclical trough on a path to recovery." AI data center revenue grew more than 30% sequentially, nearly double the expected rate, and management now guides that segment to double year over year in 2026. El-Khoury framed the content opportunity at roughly $9,500 per 120-kilowatt rack today versus roughly $115,000 per 800-volt high-voltage rack.

Valuation and the Window for Entry

The re-rating is already underway but not complete. Microchip trades at a forward P/E of 28 with an average analyst target of $114, implying roughly 29% upside from its current $88.59. Analog Devices trades at $395.65, up 46% year to date, with the Empower Semiconductor deal adding a $1.5 billion AI-server vertical power delivery capability. NXP trades at a forward P/E of 19 with an average analyst target of $308.07, roughly 5% above its current $292.26. ON Semiconductor trades at a forward P/E of 31 with an average target of $113.72, about 19% above its current $95.96. Monolithic Power trades at $1,352.74 with a forward P/E of 97, reflecting the premium the market assigns to its direct hyperscaler exposure.

The risk is that the easy phase of the re-rate is behind the group. ON Semiconductor has already gained 69% year to date, Analog Devices 46%, and Monolithic Power 44%. But with distributor inventories lean, bookings accelerating, and hyperscaler CapEx still rising, the fundamental setup supports further upside. The cycle only turns once per generation, and the window to be early has already started closing.

This article is for informational purposes only and does not constitute investment advice.