We’re Adding This Under-the-Radar AI Infrastructure Play
Earlier this week, we took a partial profit on our Corning ($GLW) position after that stock gained 100% in just three months.
We still like the stock, but it was time to trim that position. Corning is an optical networking and AI infrastructure play, and has announced recent partnerships with Nvidia ($NVDA), Meta Platforms ($META), and Amazon ($AMZN).
Meanwhile, another fiber optic name in the AI infrastructure sector has caught our attention. The stock is Amphenol ($APH), a Connecticut-based provider of fiber-optic connectors, sensors, and antenna solutions.
What Does Amphenol Do?
Amphenol makes high-speed connectors that plug wires and parts together, allowing electricity and energy to flow. These connectors allow your phone to charge, facilitate the safe operation of driverless vehicles, and perform a variety of other tasks.
In the world of artificial intelligence, companies like Nvidia design the “brains,” or GPUs, of an AI data center. Meanwhile, products made by companies like Amphenol link those brains together, using fiber optic cables that push data at tremendous speeds.
Charting Amphenol’s Consolidation and Recent Breakout
Amphenol gained a solid 23% in the first half of this year, and has climbed 76% over the past 12 months. The stock broke out to an all-time high earlier this week, after Evercore ISI named Amphenol as its top pick in the connector sector.
Amphenol’s chart reveals a steady bullish trend that has accelerated in recent weeks. The stock has occasionally dipped below its key 50-day (blue) and 200-day (red) moving averages, which is typical behavior during a consolidation.
Amphenol recently broke out of that consolidation (shaded light blue), which stretches back to September of last year. The trigger for Amphenol’s breakout may have been a small cup-and-handle formation (shaded yellow) located at the tail end of that consolidation.
Competitors and Analysts’ Targets
Amphenol lists among its chief competitors Corning, Ireland-based TE Connectivity ($TEL), and privately held Molex.
Both JPMorgan ($JPM) and Truist ($TFC) have a target of $200 for Amphenol. Both see sustained growth ahead. Meanwhile Citibank ($C), Bank of America ($BAC) and Evercore ISI placed their targets at $180.
CommScope Acquisition
In January, Amphenol completed its acquisition of CommScope’s Connectivity and Cable Solutions business. The deal brings a wide range of fiber optic interconnect and cable products into Amphenol’s portfolio. The $10.5 billion acquisition is expected to be immediately accretive to earnings.
At the time of publication, Ponsi was long APH and GLW.
