A US$5.8 trillion market value has a way of making almost every other investing number look like pocket change.
That’s roughly where Nvidia landed after its October 5 record close. It says a lot about how much investors expect artificial intelligence (AI) to reshape the economy. That said, it doesn’t tell us what every company riding the AI boom is worth.
For Canadian investors, the more useful question is who gets paid as data centres keep expanding. Nvidia supplies the processors, but those chips still need networking gear, servers, switches, storage, assembly and plenty of other hardware around them.
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Growth needs cash
That’s where Celestica (TSX: CLS) gets interesting. Celestica gives investors exposure to the same spending boom without pretending it has Nvidia’s margins or gets a fixed cut every time another GPU goes into a data centre. And Celestica’s latest growth numbers are enormous.
Second-quarter revenue jumped 62% year over year to US$4.7 billion. Adjusted earnings per share (EPS) climbed to US$2.54 from US$1.39, while adjusted operating margin improved to 8.2% from 7.4%.
The cash flow tells a slightly less impressive story. Celestica generated US$410.9 million of operating cash flow during the quarter, then spent US$263.8 million on net capital expenditures. That left US$147.1 million of non-GAAP free cash flow. Compared with US$4.7 billion of revenue, that’s a free-cash-flow margin of roughly 3.1%.
Test the price
That doesn’t mean something is wrong. Rapid growth is expensive. Celestica may need more equipment, inventory and working capital before customers finally send over the cash. A supplier can win a mountain of new business and still need to spend heavily just to deliver it. If sales keep exploding while free cash flow starts catching up, the AI story becomes considerably stronger.
Eventually, you have to decide what you’re willing to pay for it. Management’s July outlook called for 2026 revenue of US$20.5 billion and adjusted EPS of US$11.30. At its recent price, Celestica trades at roughly 33.8 times that earnings guidance.
Celestica could hit management’s earnings target and the stock could still fall simply because investors decide they no longer want to pay nearly 34 times earnings. Of course, the opposite can happen too. If earnings estimates keep climbing, today’s price can become much easier to justify. That’s why I’d rather buy gradually than pretend I know exactly what multiple the market will assign next year.
AI is bigger than one Canadian stock
Prime Minister Mark Carney highlighted Canadian strengths in areas including AI, cyber, quantum, robotics and autonomous systems. That’s encouraging for the wider industry, certainly, but isn’t a Celestica purchase order.
The company still has very company-specific risks. Large customers can cut spending, data-centre construction can slow, new programs can run into execution problems and capacity built for one expected boom can become expensive if demand disappoints.
Those risks matter far more to me than a politician saying Canada should benefit from AI. Before buying stocks in Canada, I’d also decide how much volatility I can actually tolerate. Celestica pays no dividend, so shareholders are relying on earnings growth and a higher share price over time. So holding CLS in a Tax-Free Savings Account (TFSA) can shelter qualifying gains, but it can’t stop a 20% valuation drop from feeling exactly like a 20% valuation drop.
Bottom line
Nvidia’s US$5.8 trillion valuation tells us the AI spending boom is enormous. Celestica’s own results tell us something more useful. Some of that spending is already flowing through a Canadian company.
Revenue is surging, margins are improving and management expects billions more in sales. I’d want exposure, but I wouldn’t chase it blindly.
The AI boom can keep getting bigger while Celestica’s stock gets cheaper. That’s why I’d watch free cash flow and valuation next, not just Nvidia’s latest market-cap record.
