Tariff or no tariff, the artificial intelligence (AI) revolution is coming. While it is difficult to determine who will lead the AI race, one thing for certain is the need for data centres and networking infrastructure. An AI-enabled device is just a piece of hardware if not connected to the internet or cloud. It has driven the demand for network switches. Nvidia is the most obvious for AI hardware, but other stocks are also benefiting from AI investments. These tech stocks are a smart choice for strong growth, other than the obvious choice.
The smartest growth stock to buy with $2,500
While Nvidia designs data centre graphics processing units (GPUs), it does not manufacture them. The growing investment in research and design has given rise to third-party electronics manufacturers. The demand has created cyclical growth for such manufacturers.
Among the beneficiaries was Celestica (TSX:CLS), which manufactures servers, storage, and networking solutions for Communications and Enterprises. It reports the revenue from this under the Connectivity & Cloud Solutions (CCS) segment. It also has a segment Advanced Technology Solutions (ATS) for Aerospace and Defense, Industrial, HealthTech, and Capital Equipment businesses. But the real growth is coming from CCS.
After strong double-digit revenue growth in the high-margin Enterprise segment during the 2022–2024 period, Celestica’s revenue growth has moderated. It has guided 2025 revenue growth of high teens.
But the major reason for Celestica stock’s 54% dip between February and April 8, 2025 was Trump’s tariffs on Canadian imports. However, the stock recovered and surged 78% since April 8, when the US government announced temporary exemptions for key data centre IT hardware, including servers and networking switches.
Is there more upside for this growth stock?
The recent rally was a recovery from the uncertainty around tariffs. Celestica is seeing strong demand for network switches and controllers. The company has launched a high-performance 800G family of network switches for AI-powered data centres. It expects demand for servers to pick up in the second half and drive revenue and profits.
The company has revised its 2025 revenue guidance upwards from $10.7 billion to $10.85 billion. It has also increased its adjusted operating margin guidance from 6.9% to 7.2%. The 2025 guidance justifies the 1.43 times price-to-sales (P/S) ratio and 24.5 times forward price-to-earnings (P/E) ratio.
Celestica’s growth is not in isolation. Its U.S. competitor, Flex (NASDAQ:FLEX), also saw a recovery rally of 63.5% from April 7 onwards, showing a new wave of growth momentum. Flex is trading at a P/S ratio of 0.67 times and a forward P/E ratio of 14.2 times, lower than Celestica.
Despite high valuations, Celestica is a better buy. Why?
Flex expects its revenue to fall or rise mid-single digits as strength in cloud and networking is offset by weakness in automotive, consumer devices, renewables, and industrial. Its exposure to diverse verticals has slowed its revenue growth.
Investing $2,500 in Celestica right now
You could consider investing $2,500 in Celestica now and expect a seasonal rally in the second half of 2025 driven by enterprise demand. Once the trade war is over and economic growth revives, demand could grow further as companies that have paused network investments amid tariff uncertainty proceed.
Celestica is a stock to buy and hold for the long term, as the move to promote local manufacturing could drive demand for third-party electronics manufacturers. Celestica’s high exposure in Communications and Enterprise verticals could drive its stock price in the AI and 5G revolution.
