The AI Hardware Name Hyperscalers Can't Build Without

The unsung hardware player quietly cashing in while the crowd chases the obvious names

June 24, 2026

Investors keep crowding into the obvious AI chip names, but the infrastructure buildout needs more than GPUs. One under-the-radar hardware supplier is wiring up racks, building custom switches, and helping hyperscalers turn AI capex into working data centers. The stock has already run, but Q2 could show whether this is still a contract manufacturer story or a true AI infrastructure re-rating.

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The AI Hardware Name Hyperscalers Can't Build Without

Everyone crowds into Nvidia (NASDAQ: NVDA), AMD (NASDAQ: AMD), and Broadcom (NASDAQ: AVGO) when they want AI exposure. Fair enough. But the company actually wiring up the racks, building the custom switches, and assembling rack-level systems for the hyperscalers has been quietly compounding earnings at a remarkable clip. And it still trades like a contract manufacturer.

That company is Celestica (NYSE: CLS), and the setup heading into Q2 looks tight before the next print, with real room for a multiple re-rating if the guidance raise hits.

Action Item: With CLS trading in the $350s to $380s, the stock has already moved well past earlier entry levels. For new positions, wait for pullbacks instead of chasing into Q2 earnings expected in late July.

The catalyst is a guidance raise tied to the Communications and Cloud Solutions segment, where hyperscaler demand for 800G networking gear is running ahead of plan.

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Outlook and Short-Term Prospects

Becton Dickinson’s Q4 2025 looks bumpy, with Diagnostics likely down 3-5% from soft academic spending, but Medical’s pharma systems and Alaris should grow 7%, per management guidance. 

Tariff impacts, a 2% profit drag, are cushioned by inventory tweaks, though pricing hikes aren’t on tap yet. China’s macro woes and value-based procurement could cut Asia sales by 4%, but Europe and U.S. hospital demand, up 5%, offset this. 

Cost controls, trimming overhead by 10%, keep margins steady at 25%. A $500 million R&D boost for connected devices signals growth, but execution missteps or funding cuts could crimp 2026 upside.

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Operational Overview and Recent Earnings

Celestica builds the physical hardware that powers data centers, telecom networks, and enterprise infrastructure. Think custom 800G ethernet switches, rack-scale compute systems, optical modules, and the storage and networking gear hyperscalers can't buy off the shelf.

For AI training clusters, you can't just rack up generic servers. You need purpose-built networking fabric, custom interconnects, and tight integration. That's CLS's bread and butter.

As hyperscalers like Meta (NASDAQ: META), Microsoft (NASDAQ: MSFT), Alphabet (NASDAQ: GOOGL), and Amazon (NASDAQ: AMZN) push deeper into custom silicon, they need a hardware partner who can design, manufacture, and integrate at scale. Celestica is one of a small handful that can.

Q1 already beat, and management raised the full-year outlook. Hyperscaler customers, which now make up the majority of Communications segment revenue, are still front-loading capex. That trend has not slowed. Free cash flow is funding a buyback and chipping away at net debt, and the balance sheet looks better than at any point in the past decade.

The real story is the mix shift. Hardware Platform Solutions (HPS) now drives a growing share of revenue at margins meaningfully above the legacy ATS business. The shift from sub-3% legacy EMS margins toward HPS margins in the high single digits is the entire re-rating thesis. Not a one-quarter story. A multi-year re-rating.

Action Item: Track Q2 revenue mix between HPS and ATS. If HPS keeps gaining share at current margin levels, the FY guide should move higher again. Watch for the print in late July.

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Hyperscaler Capex is the Long-Term Growth Catalyst

The big four hyperscalers keep guiding capex higher, with most of the incremental spend flowing to AI infrastructure. CLS sits directly in that flow as a critical supplier of custom networking and rack systems. The customer concentration that scared analysts in 2022, Alphabet and Meta as two top customers, now looks more like a competitive moat than a liability. Same customers, much bigger checks.

The 800G networking ramp is the near-term proof point. You want confirmation that 800G switch volumes are tracking ahead of plan, with 1.6T on the roadmap. This is the AI networking refresh cycle in real time, and it has multiple years left to run.

Adding a third major hyperscaler customer would meaningfully de-risk the concentration story and unlock further multiple expansion. Worth watching as a 2026 catalyst.

Action Item: Monitor Q2 earnings in late July for HPS revenue mix and any new hyperscaler logos. A guidance raise on the back of 800G strength is the base case.

Bear Case

The multiple has expanded fast. CLS has gone from being valued like a sleepy EMS provider to something closer to a specialty hardware name. If hyperscaler capex even hints at slowing, that multiple compresses fast.

Customer concentration cuts both ways. Two customers drive a huge portion of revenue. If either pulls back on networking spend or brings more work in-house, the top line takes a real hit before HPS can offset it.

Broadcom's recent commentary about AI demand moderation rattled the entire group. If hyperscalers pause to digest capex, CLS feels it directly through Communications orders. And a higher 10-year yield compresses growth multiples, which matters at current levels.

In-sourcing is the thesis-killer to watch. Hyperscalers have the resources to bring more hardware design in-house over time. Any sign of that accelerating ends the trade

Action Item: Hedge concentration risk with broader AI infrastructure exposure through Arista Networks (NYSE: ANET) or a semis ETF. If you want pure-play data center hardware without the customer concentration, ANET is the cleaner sleep-at-night version.

How I'd Frame a Position

Build a half-sized position on any meaningful pullback rather than chasing the current range. Q2 is your near-term catalyst.

If we get a sector-wide AI selloff that drags CLS down toward $260 to $280 without company-specific bad news, that's where you add the second half. The stock has traded far below these levels within the past year, so a move there wouldn't be unprecedented, though it would be a significant drawdown from current prices.

If you already own it, hold through Q2 earnings. Don't trim into the catalyst. Reassess only if HPS growth slows or hyperscaler capex guidance turns south.

Setup Scorecard:

Entry Zone: Pullbacks from the current $350s to $380s range, not a fixed window
Target: $440 to $470 over the next 9 to 12 months, in line with analyst consensus and the 52-week high of $474
Stop Loss: Reassess below $260
Catalyst Timeline: Q2 earnings late July 2026, 800G ramp updates, fall hyperscaler capex guidance
Confidence Level: High. The HPS margin mix shift is structural, not cyclical.

AI Hardware Demand Positions Celestica as a Sneaky Winner

Celestica isn't a chip name, but it's one of the cleanest ways to play hyperscaler AI capex. The mix shift toward Hardware Platform Solutions is driving real margin expansion, and Q2 earnings in late July should give the next leg of confirmation. The risks are real (concentration, in-sourcing, AI digestion), but at current levels you're being paid to take them.

Build into weakness, hold through the print, and let the re-rating do the work.

That's our coverage for today; thanks for reading! Reply to this email with feedback or any tech stocks you want me to check out.

Best Regards,
—Noah Zelvis
Tech Stock Insider