The artificial intelligence (AI) boom continues to fuel one of the biggest spending cycles the technology sector has ever seen, and Alphabet (GOOGL) is showing no signs of easing off the accelerator.
The Google parent has once again increased its 2026 capital spending forecast to $195 billion to $205 billion, up from its earlier outlook of $180 billion to $190 billion, with most of that investment directed toward expanding AI infrastructure.
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While investors became cautious after free cash flow turned negative last quarter, the higher spending reinforced that demand for AI computing power continues to outpace supply. This news is expected to benefit Google suppliers Lumentum Holdings (LITE) and Celestica (CLS).
Lumentum is benefiting from rising demand for the optical networking components that move massive volumes of data across AI data centers. Meanwhile, Celestica supplies the advanced electronics manufacturing and networking infrastructure that hyperscale customers need to support their expanding AI deployments.
Not every AI supplier shared in the optimism. Broadcom (AVGO) holds concerns that it could lose some tensor processing unit business to MediaTek, even though Morgan Stanley (MS) recently described Broadcom as a "core AI winner."
The market's reaction shows investors are becoming more selective. As Google commits even more capital to AI, Lumentum and Celestica appear especially well positioned to benefit from the company’s next phase of infrastructure expansion.
Stock #1: Lumentum Holdings
Based in San Jose, California, Lumentum develops advanced optical and photonic technologies that power communications networks and a wide range of industrial applications.
With a market cap of $64.9 billion, Lumentum's portfolio spans high-performance laser systems used in semiconductor manufacturing, solar production, display technologies, electric vehicles (EVs), and battery manufacturing, giving it exposure to multiple long-term growth themes.
If AI has become the market's favorite story, Lumentum has been one of its biggest beneficiaries. LITE stock has skyrocketed 665.7% over the past 52 weeks and gained 113.7% year-to-date (YTD), driven by surging demand for its optical networking components.
As hyperscale data center operators increasingly swap copper connections for faster optical links, Lumentum has found itself in the sweet spot of the AI infrastructure buildout.
www.barchart.com Naturally, that kind of performance has come with a lofty valuation. LITE stock is currently trading at 101.26 times forward adjusted price-to-earnings. The figure sits well above the industry average and its own five-year historical multiple, showing that investors are willing to pay up.
The company's latest quarterly results only reinforced the bullish narrative. On Tuesday, May 5, shares gained 1.88% after Lumentum reported Q3 FY2026 earnings that exceeded analyst expectations. Revenue increased 90.1% year-over-year (YOY) to $808.4 million, topping the $805.4 million analyst estimate.
Robust demand across the Components and Systems business drove the growth, while laser chips and products such as pump lasers continued to benefit from AI-related spending and improving scale.
Delving deeper, gross margin expanded by 540 basis points, while operating margin improved by 700 basis points. Better execution, disciplined pricing, and a richer product mix boosted bottom-line growth. Adjusted EPS came in at $2.37, representing 315.8% YOY growth and surpassing analysts' estimate of $2.24.
Wall Street expects the momentum to carry into the next quarter and beyond. Analysts project Q4 FY2026 EPS of $2.62, representing 718.8% YOY growth. For the full-year FY2026, EPS is estimated to rise significantly to $6.42, followed by another 159.7% jump to $16.67 in FY2027.
Analyst sentiment is overwhelmingly positive, with Lumentum carrying an overall "Strong Buy" rating. Of the 22 analysts covering the name, 15 rate it a "Strong Buy," two recommend a "Moderate Buy," and five maintain "Hold" ratings.
The average price target of $1,098.45 represents potential upside of 31.8%, while the Street-High target of $1,400 signals a possible surge of 67.9% from current levels.
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www.barchart.com Stock #2: Celestica
Headquartered in Toronto, Canada, Celestica delivers end-to-end design, engineering, manufacturing, and supply chain solutions for many of the world's largest technology companies.
With a market cap of $38.5 billion, it offers product design and development, new‑product introduction, engineering services, component sourcing, electronics manufacturing and assembly, testing, systems integration, and comprehensive supply‑chain management to customers worldwide.
The positioning has translated into exceptional shareholder returns. CLS stock has surged 92.3% over the past 52 weeks and gained 6.7% YTD, fueled by the relentless expansion of AI infrastructure.
Demand for the company's high-speed data center networking solutions, particularly its 800G products and next-generation 1.6T platforms, has accelerated sharply. Moreover, a streak of earnings beats and multiple upward revisions to full-year guidance make it clear why the stock has remained firmly in the market's good graces.
www.barchart.com Of course, quality rarely comes cheap. CLS stock is trading at 32.50 times forward adjusted price-to-earnings, a valuation that sits comfortably above both the industry average and the company's own five-year average multiple. Investors have shown little hesitation because the company's earnings have continued to justify the premium.
O Monday, April 27, Celestica reported its Q1 FY2026 results, and its shares climbed 2.93% as the company delivered another standout quarter, driven by robust AI-related demand in its Connectivity & Cloud Solutions (CCS) segment.
First-quarter revenue climbed 52.8% YOY to $4.05 billion, topping the $4 billion analyst estimate. Adjusted EPS came in at $2.16, while adjusted net earnings rose 78.1% to $249.5 million, underscoring the company's ability to convert booming demand into meaningful profitability.
For Q2 FY2026, Celestica projects revenue between $4.15 billion and $4.45 billion alongside adjusted EPS of $2.14 to $2.34. Looking further ahead, the company also lifted its full-year FY2026 outlook, now expecting $19 billion in revenue and adjusted EPS of $10.15.
Investors won't have to wait long for the next update, as Celestica is scheduled to report Q2 FY2026 results before the market opens on Tuesday, July 28. Analysts anticipate Q2 FY2026 EPS to grow 68.3% YOY to $2.12. For full-year FY2026, EPS is forecasted to rise 71.8% to $9.57, followed by a 49% growth to $14.26 in FY2027.
CLS stock has earned an overall “Strong Buy” rating. Out of 19 analysts covering the name, 17 have backed it with a “Strong Buy,” one maintains a “Moderate Buy,” while one carries a “Hold” rating.
The average price target of $446.53 represents potential upside of 43.4%. For the more bullish among them, the Street-High target of $510 points to a possible rally of 63.8% from current levels.
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www.barchart.com On the date of publication, Aanchal Sugandh did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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