Is Celestica Inc. (CLS) A Hidden AI Stock to Buy Right Now?
We recently published a list of the 11 Hidden AI Stocks to Buy Right Now. In this article, we are going to take a look at where Celestica Inc. (NYSE:CLS) stands against other hidden AI stocks.
David Grain, Founder & CEO of Grain Management, joined CNBC on May 1 to discuss the AI-driven demand for data centers and tariff uncertainty. The main concerns regarding tariffs are the potential impact on costs, the resilience of supply chains, and the overall effect on business operations and their expansion. He also shared his perspective on why investors are still confident in the broadband and digital infrastructure sector. He characterized broadband as universally essential and emphasised that the demand for faster connectivity has not slowed, which is why the regulatory support for broadband expansion is globally robust. Grain noted that the administration has also met expectations for lighter regulation in the infrastructure sector, which makes it easier to advance projects and close deals. He described the admin's stance as pro-growth and supportive of secure and competitive networks. Grain also observed that infrastructure, especially broadband, is an area where there is bipartisan support, given its positive impact on economic growth at both the state and local levels.
DeepSeek's announcement was also followed by reports that suggested that some companies might be pulling back on data center spending. However, the latest earnings reports appeared to settle at least this debate and confirmed that the investments in this sector were still ongoing. David Grain elaborated on the current trends in data center investments and also stated that the demand for data centers is rising due to the increasing expansion of AI, as it requires vast amounts of computing power. He explained that while the demand here is not slowing, the feasibility of building new data centers is still influenced by the availability of reliable and high-capacity electricity.
We sifted through financial media reports to compile a list of the top hidden AI stocks with AI-related operations and opportunities. We then selected the 11 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter's strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A close-up of a circuit board with components depicting the intricate electronic componentry products the company produces.
Number of Hedge Fund Holders: 44
Celestica Inc. (NYSE:CLS) provides supply chain solutions in North America, Europe, and Asia. It operates through two segments: Advanced Technology Solutions and Connectivity & Cloud Solutions. The company is riding the AI wave through business in AI/ML servers, 1.6 Terabyte switches, and advanced liquid cooling systems.
On February 21, JPMorgan initiated coverage of the stock with an Overweight rating and a $166 price target. The firm believes that Celestica would benefit from AI infrastructure investments, particularly in custom ASIC servers and white box switches, due to ties with major hyperscalers. The hyperscaler data center segment within Celestica's CCS (Cloud and Connectivity Solutions) division drove the division's revenue to improve by 28% year-over-year in Q1 2025, which totaled $1.84 billion.
The communications end market, which largely serves these hyperscalers, saw an 87% revenue increase as well. Within the CCS segment, the demand for HPS revenue grew by 99% in Q1, reaching just over $1 billion and accounting for 39% of the company's total revenue. This growth also came from hyperscalers' demand for Celestica's 400G networking switches and the ramp-up of newer 800G switch programs.
Renaissance International Small Cap Strategy stated the following regarding Celestica Inc. (NYSE:CLS) in its Q4 2024 investor letter:
'The top contributor to our portfolio performance during the quarter was Celestica Inc. (NYSE:CLS) (Canada), as the provider of electronic manufacturing services benefits from ongoing investments in AI infrastructure and high-bandwidth networking solutions. Celestica is well positioned to capitalize on emerging opportunities in next-generation data centers and networking technologies.'
Overall, CLS ranks 8th on our list of the hidden AI stocks to buy right now. While we acknowledge the growth potential of CLS, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than CLS but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.
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