Strong Performance of AI Stocks: Celestica in Focus

The current earnings season is keeping investors on edge, particularly with regard to the results of artificial intelligence (AI) initiatives among S&P 500 companies. Analysts expect a slowdown in earnings growth, with a projected increase in S&P 500 earnings of 5.3% compared to the same quarter last year. In the second quarter, this increase was still 13.2%. The technology and communications sectors, in particular, are expected to shine with earnings growth of 15.4% and 12.3%, respectively. Since last year, AI-related companies have dominated earnings discussions and contributed to significant market gains. The S&P 500 is currently trading at record levels, mainly due to the strong performance in the technology and communications sectors. According to Howard Chan, CEO of Kurv Investment Management, analysts are particularly interested in how large companies monetize their AI initiatives. Companies that succeed here are remarkably rewarded. For instance, Meta experienced a price increase after strong sales forecasts were announced, demonstrating that revenue from digital ads is efficiently financing AI investments. In contrast, the spending by giants such as Google on AI technologies raises questions about integration into existing business models. As the S&P 500 is trading at 22.3 times the future 12-month earnings estimates, surpassing its long-term average of 15.7, many investors hope that the quarterly earnings will justify the high stock valuations. Celestica, listed on the NYSE as CLS, offers a range of product manufacturing and related supply chain services. TD Securities recently raised the price target for the stock to $68 and announced a buy recommendation. The company is expected to benefit as a major data center network equipment supplier from ongoing AI infrastructure investments. Despite its position at number 33 on our list of trending AI stocks, we believe there are stocks with a more promising return potential.