The AI data centre boom isn’t just limited to the U.S. market. The wave is working its way through Canada and fast. With a number of firms looking to invest in the great Canadian AI data centre buildout, questions linger as to what kind of returns to expect as the aggressive spend-first mindset looks to dominate in these earlier years.
As sovereign AI compute (owning the compute, data and all the sort, rather than renting it) becomes a bigger topic while domestic energy players look to ready themselves for what could be a drastic pick-up in demand, perhaps betting on Canada’s AI boom with some of the lesser-known players could be the ultimate value trade.
Of course, not every investor is going to be a big fan of the capital expenditures it takes to procure the components, expertise, land, power, and everything else to build these data centres. Not to mention the resistance that such ambitious projects could face.
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Celestica: Canada’s fast-rising AI star
Either way, I think there are several firms that can cash in on the AI data centre revolution, from the firms spending heavily on GPU clusters to plays on the power side, all the way to hardware and networking component firms, like Celestica (TSX: CLS), which has arguably been one of the biggest surprises in all of the TSX Index in recent years.
I’ve been a huge fan of Celestica for quite some time and pounded the tables a number of times over the years, as the firm doubled down on its connectivity and cloud solutions segment. Sure, server racks and the networking switches that go into constructing a next-generation AI data centre might not be the most exciting part of the buildout. Arguably, it’s all about GPUs, rather than other hardware that often takes a backseat.
At the same time, Celestica has pulled off what I believe is one of the most glorious pivots in Canadian tech, as the firm recognized the AI demand to come and spent heavily on efforts to become one of the key suppliers for some of the boldest giants financing the revolution. With heated AI demand paving the way for hiked guidance and blowout numbers, questions linger as to how long the good times can keep going for the magnificent Canadian data centre hardware play.
Shares have already doubled up many, many times over the past few years. And big-name hedge funds have taken notice of the rising star in the Canadian market. While things have been far more turbulent in the past six months, I do think that the valuation makes a lot of sense.
Too cheap to pass up?
At 35.7 times trailing price-to-earnings (P/E), you’re not getting a bad deal for one of the biggest forces in the Canadian tech scene. As the firm continues to kick things into high gear going into year’s end, as companies look to spend big money on the latest and greatest networking gear, it’s hard to see how shares of Celestica could begin to top out.
Are there going to be volatile periods as investors digest explosive surges?
Most definitely. But a name like Celestica, I think, has a promising long-term trajectory ahead of it, and those who can stomach the choppiness might be the ones to keep doing extraordinarily well.
