On Semiconductor Acquires Vcore Power Technologies to Enhance AI Data Center Offerings

On Semiconductor Strengthens AI Power Management Portfolio with Vcore Acquisition

On Semiconductor Corporation (NASDAQ:ON) announced an agreement to acquire the rights to Vcore power technologies and related intellectual property from Aura Semiconductor. This strategic acquisition, set to close in the fourth quarter of 2025 pending customary conditions, is designed to significantly enhance On Semiconductor's power management portfolio, with a particular focus on the escalating demands of AI data center applications.

The transaction is expected to have a minimal impact on On Semiconductor's GAAP and non-GAAP earnings per share in the first fiscal year following its completion, with accretive effects anticipated thereafter.

Strategic Rationale and Technological Integration

The integration of Vcore's cutting-edge power technologies is central to On Semiconductor's strategy to address the complete power tree in AI data center applications, from grid to core. Sudhir Gopalswamy, group president of the Intelligent Sensing and Analog and Mixed-Signal Group at onsemi, emphasized the company's commitment to solving the energy and efficiency challenges of future AI data centers by offering a comprehensive suite of differentiated intelligent power solutions.

On Semiconductor, building on its extensive expertise in silicon and silicon carbide (SiC) technologies, already provides solutions for solid-state transformers, power supply units, and 800 VDC distribution. The addition of Aura Semiconductor's Vcore power technologies is projected to enable solutions with 30% higher power density and 20% thermal efficiency gains for AI workloads. This advancement is critical for achieving greater compute capacity per rack in AI infrastructure.

Market Context: Accelerating AI Data Center Growth

The acquisition comes amid a profound shift in the semiconductor industry driven by the increasing energy demands of artificial intelligence. AI data centers are rapidly becoming the most power-intensive computing environments globally. Projections indicate that global data center consumption is expected to surge from 460 TWh in 2022 to over 1,000 TWh by 2026, with AI operations alone forecast to account for 40% of this demand.

Major hyperscalers, including Meta, Microsoft, and Amazon, are collectively projected to invest $250 billion in AI infrastructure by 2027. Goldman Sachs Research estimates a $2.6 billion market for advanced power semiconductors in AI by 2030, underscoring the critical need for energy-efficient power solutions that align with trends like NVIDIA's 800V DC architecture.

Financial Implications and Market Positioning

On Semiconductor currently holds a 4.87% share in the AI-specific power solutions niche as of Q2 2025, a segment characterized by margins exceeding 40%. The Vcore acquisition is expected to expand this market share by an additional 1.5–2% within three years. Analysts project that this strategic focus could generate an incremental $400-500 million in annual revenue for On Semiconductor by 2030.

Despite broader market headwinds, On Semiconductor reported a non-GAAP gross margin of 40% in Q1 2025. While this represents a decrease from 45% in 2024, its AI data center segment revenue doubled year-over-year, demonstrating the resilience and growth potential within this specialized market. The integration of Vcore technologies is expected to stabilize margins by 2026 as the company scales production of high-margin SiC and GaN-based power solutions.

Analyst Perspectives and Future Outlook

Industry analysts have responded positively to On Semiconductor's strategic move. Firms such as Wedbush and BofA have upgraded the stock to "Outperform" and "Buy," respectively, citing the Vcore acquisition as a significant catalyst for margin expansion and market share gains. Price targets for On Semiconductor (NASDAQ:ON) range from $55 to $65, implying a potential 30–40% upside from current levels.

This acquisition reinforces On Semiconductor's commitment to becoming a leading provider of end-to-end power solutions for AI data centers. The company's ability to monetize its intellectual property in energy-efficient power solutions, particularly in a market where demand is outpacing supply, positions it favorably for long-term growth. Key factors to monitor in the coming quarters include the successful integration of Vcore's technologies and the accelerated introduction of new products leveraging this expanded portfolio to meet the evolving demands of AI infrastructure development.