Today’s tech superstar on the Nasdaq Composite is NVIDIA (NASDAQ:NVDA). This year is memorable for the graphics processing unit (GPU) because it became the king of artificial intelligence (AI). As of this writing, the market cap stands at US$3.1 trillion. Many investors regret missing out on the AI stock’s meteoric rise.
NVIDIA has a long growth runway ahead, although if you’re a Canadian investing in foreign stocks, you must hold it in your Registered Retirement Savings Plan (RRSP) to avoid paying a 15% foreign tax. However, Celestica (TSX:CLS) is also a super tech stock.
You won’t worry about the foreign tax because Celestica is a domestic stock. Hold it in a Tax-Free Savings Account (TFSA) for tax-free capital gains. Performance-wise, current investors are up 108.01% year to date. The overall return in 3.01 years is 748% compared to NVIDIA’s +530.44% in the same period. Also, Celestica trades at C$80.73 per share versus the US$128.20 for the American counterpart.
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AI player
Celestica provides complete lifecycle solutions to help clients optimize their supply chains, overcome market challenges, and minimize costs.
The $9.59 billion company is three decades old. Today, it offers products and services to original equipment manufacturers (OEMs), cloud-based, and other service providers. Customers come from various industries, such as aerospace, defence, industrial, health, communications, and enterprise markets.
Revolutionizing AI is not exclusive to NVIDIA. Celestica’s DS400, IU 32-port 400GbE data center switch is a powerful, high-capacity switch that’s ideal for modern AI workload demands. DS4000 is just one of a line of switches offering an open management approach and enabling cost efficiency at scale.
Financial performance
Advanced Technology Solutions (ATS) and Connectivity & Cloud Solutions (CCS) are the core business segments that contribute to revenues. The former has a higher margin profile and margin volatility and requires higher working capital. CCS is in a more competitive environment, subject to negative pricing pressures and experiences technology-driven demand shifts.
Celestica is a dwarf alongside NVIDIA in terms of market capitalization. Nevertheless, its financial performance is mighty impressive. In the first quarter (Q1) of 2024, revenue and net earnings climbed 20.2% and 311.7% to US$2.2 billion and US$101.7 million versus Q1 2023. For 2024, the revenue outlook is US$9.1 billion compared to the original forecast of US$8.5 billion.
Management considers global supply chain constraints as a business risk in the mid-term. Celestica can’t predict future developments, including when ultimate suppliers return to full production and logistics providers’ operations return to normal. Fortunately, growth is on the horizon for the CCS segment following the definitive agreement to acquire NCD Global Services for US$36 million.
NCS, a U.S.-based company that offers IT infrastructure and asset management business, is expected to accelerate the IT Services roadmap within the CCS segment.
Thriving in a competitive sector
NVIDIA is the dominant force in the AI space, but other tech giants are potential threats to its business. They are developing custom chips to handle AI workloads. Meanwhile, Celestica commits to making necessary investments to support long-term objectives and create shareholder value. Thus far, the stock performance reflects a thriving business in a highly competitive technology sector.
