PBCM Sold on Semiconductor (ON) Due to Persistent Downturn in EV Demand

Pelican Bay Capital Management (PBCM), an investment management company, released its fourth-quarter 2025 investor letter. A copy of the letter can be downloaded here. PBCM Concentrated Value Strategy returned 8.5% in the quarter, compared to a 3.8% return for the Russell 1000 Value Index. The robust performance of AI-related stocks and commodities exposure drove the Strategy’s performance in the quarter. For the full year, the Strategy returned 20.6% compared to 15.9% for the Index. The firm seeks to invest in high-quality companies with a strong balance sheet. Please review the Fund’s top five holdings to gain insights into their key selections for 2025.

In its fourth-quarter 2025 investor letter, PBCM highlighted ON Semiconductor Corporation (NASDAQ:ON). ON Semiconductor Corporation (NASDAQ:ON) is a semiconductor company specializing in intelligent sensing and power solutions. On February 5, 2026, ON Semiconductor Corporation (NASDAQ:ON) stock closed at $63.10 per share. One-month return of ON Semiconductor Corporation (NASDAQ:ON) was 1.51%, and its shares are up 23.12% over the past twelve months. ON Semiconductor Corporation (NASDAQ:ON) has a market capitalization of $25.806 billion.

PBCM stated the following regarding ON Semiconductor Corporation (NASDAQ:ON) in its fourth quarter 2025 investor letter:

"In addition to the trading activity we discussed above, we also made the decision to exit our positions in CME Group (CME) and ON Semiconductor Corporation (NASDAQ:ON). We have held a position in On Semiconductor (ON) for nearly two years. Shares have languished because the downturn in Electric Vehicle (EV) demand has persisted for far longer than anticipated. In our view, recent changes to the U.S. EV Tax Credit Regime and faltering economic growth have delayed the expected recovery in EV sales for several more years. This view is confirmed by recent announcements from General Motors, Ford, and Volkswagen that they are curtailing EV production capacity.

Consequently, we believe ON’s normal earnings power will be closer to $3.00 per share over the next three years, substantially below our initial outlook of $5.00–$7.50. This revised forecast lowers our price target to $50, which matches today's share price. Additionally, while Chinese auto manufacturers represent a growing market for ON’s chips, the recent U.S.-China trade spat presents a significant risk to future business. We moved to the sidelines to make room for a new investment opportunity."

ON Semiconductor Corporation (NASDAQ:ON) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 45 hedge fund portfolios held ON Semiconductor Corporation (NASDAQ:ON) at the end of the third quarter, compared to 50 in the previous quarter. While we acknowledge the potential of ON Semiconductor Corporation (NASDAQ:ON) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered ON Semiconductor Corporation (NASDAQ:ON) and shared a list of most undervalued semiconductor stocks to invest in. In addition, please check out our hedge fund investor letters Q4 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.