Celestica (TSX: CLS) has continued to be wildly volatile, tanking on Thursday by close to 6% after a steep Wednesday rebound of more than 8%. Indeed, the AI and tech waters probably won’t settle anytime soon, but whether investors should sell the rips or buy the dips remains the big question.
While Celestica is bound to be dragged down when tech is having a bad day, I do think that longer-term thinkers who can stomach another 20% (or more) drop might wish to consider any such pressure as an opportunity to add to a position rather than hit the exit button.
As for traders, it’s impossible to tell the next course as the broad markets wander through one of the most volatile times of the year. As more focus (and punishment) shifts towards the big spenders (think the hyperscalers), it’s hard to imagine a scenario where the AI hardware plays don’t remain under the microscope.
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The tech sector is getting rattled: The pain might not be over yet
Indeed, with Alphabet (NASDAQ: GOOG) suffering an historic 12% crash after reporting earnings, it certainly feels like there is one simple way for the hyperscaler to redirect the pessimism elsewhere (probably towards the semis): committing to capping or cutting CapEx.
Any way you look at it, it’s hard not to be nervous, even in a top-notch name like Celestica, which is showing no signs of letting up. In the last quarter, Celestica saw strength right across the board and until AI demand settles, it’s hard to imagine the firm falling flat when it steps up to the plate again to report.
Moving into next week, investors should more or less expect more of the same: extreme swings that will surely test investors’ stomachs. Despite the incredible quarterly showing for the third quarter, it’s probably going to be more about the mood of tech on any given day. Shares could rocket higher by double digits, or they could march lower as tech-focused investors look to take profits on AI while seeking to park the cash in steadier places.
Celestica is firing on all cylinders, but sector fears could mount in November
While I’ve remarked on Celestica’s incredibly cheap price-to-earnings (P/E) multiple (26.9 times trailing P/E), it’s not hard to imagine what would happen to these metrics if AI infrastructure demand were to cool off, perhaps in response to the punishment in spenders for their less-than-stellar cash flows. In the meantime, Celestica’s management team is going to do their best to hit their new, ambitious 2027 targets, even as a hurricane moves through the tech sector.
With many analysts staying upbeat on Celestica after a tremendously bullish quarter, it’s hard to suddenly turn bearish. Of course, that may all change if one of the hyperscalers flinches, perhaps to appease investors who look just about done with sky-high AI-related CapEx, even as the applications and productivity gains from the technology start to really surface.
In any case, investors should be ready for extreme chop from the name as November kicks off. Perhaps the post-Halloween trading days could be even scarier for AI investors worried their profits will evaporate.
