The AI boom is beginning to reshape more than demand—it’s changing who gets chips first.

During its second-quarter earnings call, ON Semiconductor Corp. (NASDAQ:ON) revealed that surging AI demand forced it to prioritize shipments to AI data center customers over parts of its traditional automotive and industrial business. This offers one of the clearest signs yet that AI is reshaping supply decisions across the semiconductor industry.

“We prioritized shipments to AI data center over automotive and industrial,” CEO Hassane El-Khoury said, adding that the company redirected some constrained products toward AI customers while production works to catch up.

He later reiterated that ON Semi “did prioritize AI data center,” describing the move as beneficial for the company’s long-term growth and saying supply should improve during the second half of the year.

AI Is Changing Chip Priorities

The comments underscore how AI infrastructure is climbing to the top of chipmakers’ priority lists. ON Semi expects its AI data center revenue to more than double in 2026, driven by demand for power management chips used in next-generation AI servers and power systems.

For investors, the takeaway extends beyond ON Semi. As AI infrastructure spending accelerates, data center customers are increasingly competing with traditional markets such as automotive for semiconductor supply—a shift that could reshape priorities across the industry if demand continues to outpace production.

Shutterstock