First, there is the AI build-out phase, during which large language models (LLMs) are built and trained, and inference (running models to power autonomous agents) occurs. <\/p>\n
The second phase is when models move out of the cloud and into physical AI, where inference occurs at the edge. You can think of this as an AI-powered robot or an electric vehicle (EV) performing inference close to where data is collected, rather than in the cloud. <\/p>\n
Vertiv and ON Semiconductor <\/p>\n
Over time, it’s likely that, after the initial massive investment in the first phase, spending in the second phase will take over and grow over the long term. All of this leads us to where Vertiv and ON Semiconductor fit in. Both are partners of Nvidia in developing technology for AI data centers, but they have vastly different investment profiles. <\/p>\n
Data source: Author’s analysis. <\/p>\n
The investment case for Vertiv and ON Semiconductor <\/p>\n
Vertiv offers investors a pure-play AI<\/a> infrastructure build-out play for the first phase and indirect exposure to the second phase — after all, as physical AI grows, it will also drive growth in digital infrastructure. In addition, Vertiv’s exposure to the new generation of data centers, in which Nvidia is leading development<\/a>, makes it a key player for years to come. <\/p>\n Story Continues <\/p>\n Investors buy Vertiv stock for the certainty of its medium-term growth and the upside potential from a ramp-up in hyperscalers’ spending plans, a key reason why the stock has outperformed this year. <\/p>\n In contrast, ON Semiconductor’s current data center exposure is expected to account for only $500 million of its almost $6.5 billion in revenue in 2026. The company’s traditional key end markets are power and sensing chips for EVs and industrial applications, including EV charging, renewable energy, and industrial automation, among others. <\/p>\n That said, its data center business is set to double in 2026, and its intelligent power, sensing, and control solutions make it a key player in physical AI. It’s also an Nvidia partner for the new generation of high-power data centers. Moreover, management recently decided to fill the missing link in its physical AI exposure by adding connected compute capability with the $7 billion acquisition of Synaptics. <\/p>\n This means that, for example, in an industrial robot, ON Semiconductor will be able to offer the sensors to collect data, the power management system to efficiently drive the robot, the control technology to command the robot’s motors and motion, and now, with Synaptics, it will have edge AI computing power to make real-time decisions. <\/p>\n Valuation matters <\/p>\n The comparison between the two is somewhat reflected in the valuation discrepancy, whereby investors are willing to pay much more for Vertiv’s medium-term AI exposure than for the promise of ON Semiconductor’s long-term growth. <\/p>\n Here’s a look at the Visible Alpha Wall Street consensus estimates for a commonly used valuation metric: price-to-free-cash-flow. <\/p>\n Buy Vertiv if you think there’s upside potential in AI spending plans, because it will definitely be a beneficiary. Still, the stock is probably worth avoiding on valuation grounds if you think there’s no more upside potential left. <\/p>\n ON Semiconductor is a significantly cheaper stock, but to own it, you will have to value heavy EV\/industrial exposure and the relatively smaller medium-term AI exposure and believe management can integrate Synaptics successfully. I think the latter is a more compelling option because there’s little doubt that physical AI (including autonomous driving and robotics\/automation) is the future. <\/p>\n Should you buy stock in ON Semiconductor right now? <\/p>\n Before you buy stock in ON Semiconductor, consider this: <\/p>\n The Motley Fool Stock Advisor analyst team just identified what they believe are the\u00a010 best stocks<\/a> for investors to buy now\u2026 and ON Semiconductor wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. <\/p>\n Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation,\u00a0you’d have $390,394!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,209,184!* <\/p>\n Now, it’s worth noting\u00a0Stock Advisor’s total average return is 899% \u2014 a market-crushing outperformance compared to 206% for the S&P 500.\u00a0Don’t miss the latest top 10 list, available with\u00a0Stock Advisor, and join an investing community built by individual investors for individual investors. <\/p>\n See the 10 stocks \u00bb<\/a> <\/p>\n *Stock Advisor returns as of July 29, 2026. <\/p>\n Lee Samaha<\/a> has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia and Vertiv. The Motley Fool recommends ON Semiconductor and Synaptics. The Motley Fool has a disclosure policy<\/a>. <\/p>\n<\/a> Image source: Getty Images. <\/p>\n
<\/a> Data source: Visible Alpha. *Does not include Synaptics. Which stock to buy? <\/p>\n