ON Semiconductor CEO Hassane El-Khoury defended the company's core business as shares tanked 20% after announcing its largest acquisition to capitalize on physical artificial intelligence.
The maker of power and sensing components for the automotive industry on Thursday announced plans to buy edge AI and wireless connectivity solutions company Synaptics in an all-stock deal.
The pivot into physical AI grows its addressable market by an additional $30 billion, or $243 billion, by 2030, On Semiconductor said in a release.
"That is the strategic value of it, complementary to everything we have done on a very strong foundation," El-Khoury told CNBC's "Squawk on the Street" on Friday.
The acquisition also opens new markets for the company, including an AI-centric compute platform, he said.
On Semiconductor is betting on a world with physical systems capable of sensing and making decisions in real time, such as robots and autonomous vehicles.
Synaptics' Astra platform, which uses AI processors and wireless connectivity, will bolster its Edge AI capabilities, On Semiconductor said. Edge AI refers to running AI locally on hardware.
"There is no overlap on the product, which is why this deal is very exciting from a [research and development] and a product perspective," El-Khoury said.
The executive also told CNBC that the company's data center business is running smoothly and accelerating.
"The foundation that we have built is strong," he said. "We will continue to deliver on that. We have no hesitation about our core business â that remains strong."
ON Semiconductor expects the deal to close in mid-2027 and generate $200 million in annual synergies within 18 months.
