20 Industrial Stocks Already Riding the AI Wave

6. Amphenol Corporation (NYSE:APH)

Number of Hedge Fund Holders: 51 

YTD Return as of August 1: 32%

Approximate Percentage Revenue from AI: 24%

Amphenol Corporation (NYSE:APH) primarily designs, manufactures, and markets electrical, electronic, and fiber optic connectors. It has a range of product offerings for AI firms, including chipsets, networking products, and server and GPU solutions. The firm also markets high speed power connectors used in data centers that compute AI tasks for large software firms. The surging demand for AI products has enabled the company to record a more than 56% organic increase in datacom sales for the second quarter. The company also plans to expand capital investments in the coming months to keep pace with the quantity and quality of orders from AI-enabled customers.

Adam Norwitt, the CEO of Amphenol Corporation (NYSE:APH), commented during the second quarter earnings call that between March and June, bookings for the firm were particularly strong from IT datacom customers focused on artificial intelligence, even though traditional datacom orders also saw a nominal increase. Norwitt added that his firm expected to grow sales in the datacom segment during the third quarter as customers flocked towards the leading high-speed and power interconnect products manufactured by the company.

In its Q2 2024 investor letter, Aristotle Atlantic Partners, an asset management firm, highlighted a few stocks and Amphenol Corporation (NYSE:APH) was one of them. Here is what the fund said:

“Amphenol Corporation (NYSE:APH) is one of the world’s largest designers, manufacturers and marketers of electrical, electronic and fiber optic connectors and interconnect systems; antennas; sensors and sensor-based products; and coaxial and high-speed specialty cable. The company estimates, based on recent reports of industry analysts, that worldwide sales of interconnect and sensor-related products were approximately $235 billion in 2023. The company aligns its businesses into three reportable business segments: Harsh Environment Solutions, Communications Solutions, and Interconnect and Sensor Systems. The company sells products to customers in a diversified set of end markets.

We see Amphenol benefiting from increased spending by cloud service providers, hyperscalers and enterprises on new data center architectures that enable AI computing technologies. The increased interconnect content that AI-enabled data centers require, we believe, will underpin a double-digit sales growth outlook for the company over the next few years. The company has attractive end-market diversification, with exposure to both short-cycle and long-cycle, and no single end market vertical represents more than 25% of revenues. Additionally, Amphenol has strong free cash flow generation, which has supported a successful M&A strategy that has driven enhanced advancement.”