China did it again with Deepseek, an alternative to ChatGPT available at just 14% of the cost of OpenAI. Deepseek attained cost supremacy using Nvidia’s (NASDAQ:NVDA) older generation H800 graphics processing units (GPUs), making one question the need for more advanced H100 GPUs. Lately, investors have been looking for a return on investment (ROI) in their artificial intelligence (AI) investments. Nvidia became the poster boy of AI with its advanced, super-expensive data center GPUs. While Nvidia stock surged 1,170% between October 14, 2022 and January 24, 2025, Celestica (TSX:CLS) stock surged 1,358%.
This Canadian stock overtook Nvidia in the AI race. When Deepseek shook AI chipmakers, Celestica stock fell 28% in just one day.
Celestica stock is trading at an all-time high
Celestica is an electronics manufacturing service (EMS) and Original Design Manufacturer (ODM). Its business is divided into:
- Advanced Technology Solutions (ATS) for Aerospace and Defense, Industrial, HealthTech, and Capital Equipment businesses
- Connectivity & Cloud Solutions (CCS) comprising servers, storage, and networking for Communications and Enterprises
Just as Nvidia’s data center segment was the key beneficiary of the AI boom, Celestica’s CCS was the key beneficiary of the AI boom. Many enterprises and hyperscalers invested in AI capability, which grew Celestica’s CCS revenue at a 15% compounded annual growth rate (CAGR) between 2022 and 2024.
Celestica’s 1,358% stock price rally has increased its price-to-sales ratio from 0.45 times on December 31, 2023 to 1.3 times. The company expects a slow start to 2025. However, it expects the demand to reaccelerate in the second half as a new enterprise customer ramps up AI investments.
What’s next for Celestica?
After a splendid rally, one often wonders if it is too late to buy the stock, as the company has probably completed its high growth phase. If you look at Celestica’s history, the last time this stock crossed the $100 mark was in 2000, before the dot.com bubble burst.
It is time to tread with caution. While the AI and data centre tailwinds act as catalysts, Celestica is operating in a highly competitive area. Unlike Nvidia or OpenAI, which enjoy low to no competition, a company can replace Celestica with another EMS or ODM.
Even though the future looks bright for Celestica, the lack of competitive edge makes me bearish on the stock while other analysts remain bullish.
Riding the AI wave
Many analysts have downgraded Advanced Micro Devices (NASDAQ:AMD) for being late in the AI race. AMD has always been a cost-efficient alternative to Nvidia’s GPUs. An interesting fact is that DeepSeek has partnered with AMD to strengthen its position in the AI space. If it is established that a company doesn’t need Nvidia’s expensive GPUs for AI adoption, AMD could ride the next AI rally.
And even if Deepseek did use Nvidia’s high-end GPUs, companies are looking for a cost-efficient alternative to Nvidia for their AI infrastructure. While AMD’s GPUs may not match the performance of Nvidia’s high-end GPU, they are the closest alternative to it and the lower-cost alternative also has a huge market.
Final thoughts
Long story short, Celestica stock is riding a growth spree and you could consider investing a small amount to take advantage of any more upside left in the stock. But if you want to take advantage of the next AI wave, AMD is a better option as it has the technology edge of being the second best and the stock is trading at a cyclical low.
