Why These 3 Automotive & Industrial Chip Stocks Just Soared

Key Points

• Microchip Technology's raised guidance signaled a potential turnaround in the automotive and industrial semiconductor market.
• ON Semiconductor and Allegro Microsystems also saw strong gains, driven by low customer inventory levels and early recovery signs.
• All three companies are positioned to benefit from replenishment cycles and longer-term trends like robotics and EV demand.

On Dec. 3, many semiconductor stocks that serve automotive and industrial markets spiked. While artificial intelligence (AI) semiconductor companies garner the most headlines, investors should not overlook automotive and industrial chip stocks.

They play key roles in enabling electric and autonomous vehicles, robotics, and industrial automation. Below, we’ll detail three of these names that rose by 9% or more on Dec. 3, along with the reason behind those moves.

MCHP Kicks Off Auto and Industrial Chip Gains on Guidance Increase

Demand for automotive and industrial chips can be highly cyclical. Buyers often make a large number of purchases quickly to replenish their inventory of these products. They then work through that inventory, depressing demand for chip providers over an extended period. For the past two years, automotive and industrial chip demand has been in a downturn, and investors have looked for signs of the next rebound.

This is why investors were very happy to see Microchip Technology raise its guidance for next quarter on Dec. 2. This led shares to gain over 12% the next day.

The company’s guidance update for next quarter implies a 12% increase in sales.

Achieving this would be a strong step in the right direction for Microchip, as the company has not posted positive sales growth in nine quarters.

Microchip generates just under half of its revenue from automotive and industrial markets.

After the guidance increase, MarketBeat tracked multiple Wall Street analysts who lifted their price target on the stock. Overall, the consensus price target of around $75 implies 14% upside in shares.

ON Rises Post-Microchip Update, Eyes Replenishment and Recovery Cycles

ON Semiconductor NASDAQ: ON also rallied after Microchip's news, gaining 11% on Dec. 3. Like Microchip, ON Semiconductor is deeply exposed to the auto and industrial segments, which account for 78% of its total revenue. 

At the UBS Global Technology & AI Conference on Dec. 2, ON Semiconductor noted that demand trends haven’t changed much since September, but it also highlighted that customer inventories are historically low.

This sets the stage for a potential restocking phase—often a leading indicator of industry recovery.

The company has now gone 11 quarters without revenue growth, but any pickup in inventory replenishment could reverse that trend. 

While analysts have not yet raised their targets in response to Microchip's announcement, the consensus price target of around $59 implies 8% upside in shares. If demand starts to return meaningfully, it would not be surprising to see price targets move higher.

ALGM: Analysts Eye +30% Upside in This Auto, Industrial, and Robotics Chip Stock

Last up is Allegro Microsystems NASDAQ: ALGM, which saw shares gain by 9% on Dec. 2 following the updated guidance from Microchip. Like the others, Allegro is closely tied to auto and industrial markets, which generate 73% of its revenue. However, unlike Microchip and ON, Allegro’s recovery appears to be further along.

From early 2024 to early 2025, the company posted five quarters in a row of negative sales growth. However, during the last two quarters, Allegro posted positive growth rates of 22% and 14%. The company’s midpoint revenue guidance for next quarter implies growth of 24%.

While Allegro also has not seen price target upgrades after the Microchip guidance release, analysts are bullish on this stock, with a consensus price target of $39 per share, indicating that the stock could rise by nearly 34%.

While Allegro’s growth is accelerating now due to auto, industrial, and e-mobility demand, it also has a significant opportunity in robotics longer term. The company recently announced that it secured a humanoid robotics design win in China.

Auto and Industrial Chip Environment Moves in the Right Direction

Overall, the recent gains in these names show how auto and industrial chip stocks can often move in tandem. Although no one truly knows when a recovery in demand will occur, multiple signs point to the worst being over for companies in this space.