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Considered a bellwether for the artificial intelligence (AI) industry, Nvidia's (NVDA) stronger-than-forecast third-quarter earnings indicate that the rapid growth is set to continue for AI stocks. With revenues rising 94% from the previous year to $35.1 billion and earnings up by an even sharper 103% to $0.81 per share, the Jensen Huang-led AI chip giant also issued optimistic guidance for the next quarter and FY 2025 as Blackwell production starts to ramp up.
However, Nvidia's continued outperformance is not only good news for NVDA investors; it also creates a positive ripple effect for companies across the AI data center ecosystem. To that end, brokerage firm Evercore believes the three stocks highlighted below are among those that can emerge as winners amid the next wave of the ongoing AI boom. With positive consensus ratings from Wall Street analysts, these AI stocks could be worth considering for investors in search of more data center upside.
#1. Arista Networks
Founded in 2008, Arista Networks (ANET) specializes in client-to-cloud networking solutions for large-scale data centers, AI platforms, and campus networks. It provides high-performance switching, routing, and Wi-Fi solutions powered by its Extensible Operating System (EOS). The company serves over 8,000 customers globally, including major cloud providers, financial institutions, and enterprises. ANET currently commands a market cap of $128 billion.
ANET stock has delivered dizzying returns in 2024 so far, soaring 74.3% on a YTD basis.
The company's stock performance has been aided by impressive revenue and earnings growth rates over the years. In the past 10 years, Arista has grown its revenue and earnings at CAGRs of 28.82% and 43.99%, respectively. Moreover, since its listing in 2014, Arista has seen its enterprise value grow from $3.55 billion to $120.59 billion.
In the most recent quarter, Arista beat consensus estimates on both revenue and earnings. Revenues for the third quarter came in at $1.811 billion, up 20% from the previous year, while earnings increased by 31.2% to $2.40 per share. This marked the 16th consecutive quarter that ANET surpassed Wall Street's average earnings estimate.
The company reported net cash from operating activities of $2.7 billion, compared to $1.5 billion in the corresponding nine-month period of the prior year. Overall, Arista fortified its cash balance from the start of the year to $3.2 billion (vs. $2 billion), with no short-term debt on its books.
Further, Arista Networks is making significant strides in expanding its footprint in the Ethernet networking market for AI data centers, a distinct networking technology compared to offerings from its competitors. Central to this strategy is Arista’s ambitious goal to generate $750 million in AI networking revenue by targeting an estimated $60 billion market opportunity.
The company is gaining traction through notable client wins, often displacing legacy providers. These new clients prioritize not just faster Gigabit speeds but also simpler, less complex solutions - a key value proposition for Arista. Switching costs for customers who adopt Arista's solutions are substantial, as evidenced by its strong relationships with major clients like Microsoft (MSFT) and Meta (META), who contributed over 10% of Arista’s revenue in the first half of 2024.
Additionally, Arista’s high-speed, cloud-based integrated networks have established a solid presence in the cloud networking domain. Its focus on cloud and hyperscalers provides a strong competitive edge, positioning the company to capitalize on increasing AI investments and the demand for faster, low-latency networks. These factors underscore Arista’s potential for sustained growth in this rapidly evolving market.
Analysts have rated ANET stock a “Moderate Buy” overall, with a mean target price of $437.12, which indicates an upside potential of about 6.5% from current levels. Out of 19 analysts covering the stock, 13 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, 4 have a “Hold,” and 1 has a “Strong Sell” rating.
#2. Vertiv Holdings
Vertiv Holdings (VRT) traces its roots back to 1965, when it was part of the Emerson Electric Co. (EMR) as its network power division. Now, it designs, manufactures, and services technologies critical to digital infrastructure. Its offerings include power management, thermal management, integrated rack systems, and monitoring systems for data centers, communication networks, and industrial facilities. VRT's market cap currently stands at $52.6 billion.
VRT stock has been a high flyer this year, zooming 172% on a YTD basis. Longer term, the company has increased its enterprise value from $844.27 million in 2018 to $54.7 billion currently. Moreover, the stock also offers a modest dividend yield of 0.11%.
In its most recent quarterly report, Vertiv's revenue and earnings came in ahead of consensus estimates. In Q3, the company reported revenues of about $2.1 billion, which was 19% higher than the previous year. Earnings soared by 46.2% to come in at $0.76 per share, surpassing the Street's expectations of $0.69.
Operating cash flows for the first nine months of 2024 reached $894.1 million, up from $544.3 million in the year-ago period. This helped the company increase its cash balance to $908.7 million from $780.4 million at the start of the year, well above its short-term debt levels of $485.4 million.
Vertiv’s status as a leading provider of power and thermal solutions for hyperscalers and data center colocation providers remains a significant competitive advantage. The company has strengthened its collaboration with Nvidia, with the semiconductor giant set to commence volume production of its Blackwell AI chips in Q4 2024, continuing through 2025.
The market’s optimism was further fueled by Vertiv's updated guidance, reflecting a more substantial backlog and improved pipeline visibility through 2025. The company raised its 2025 organic sales growth forecast to 14%, aligning with the strong Q3 backlog. This signals an acceleration in topline growth next year, which could boost profitability given the operating leverage inherent in Vertiv’s business model. Additionally, robust performances in the Americas and EMEA regions, combined with enhancements in manufacturing efficiencies and productivity, have supported the company’s scalability and margin improvements.
Looking ahead, Vertiv’s increasing focus on high-value power and thermal solutions, particularly in liquid cooling technology, is expected to further strengthen its operating leverage and profitability trajectory.
On Wall Street, 13 analysts have unanimously deemed VRT stock a “Strong Buy,” with a mean target price of $141.58. This indicates an upside potential of about 7.7% from current levels.
#3. Amphenol
Last up on the list of AI stock winners is Amphenol Corp (APH). Founded in 1932, Amphenol originally focused on manufacturing tube sockets for radios. Currently, it's a leading global provider of high-technology interconnect, sensor, and antenna solutions. Amphenol designs, manufactures, and markets products that serve diverse end markets, and carries a market cap of $89.5 billion.
In 2024, APH stock is up 47.5% so far, and offers a dividend yield of 0.90%.
Over the past decade, Amphenol has grown its revenue and earnings at CAGRs of 10.67% and 12.35%, respectively. This has resulted in the company seeing its enterprise value grow from $18.05 billion in 2014 to $93.54 billion now.
In its Q3 results, APH reported a beat on both revenue and earnings, with record sales of $4.04 billion for the period. This marked an increase of 15% from the prior year. Similarly, EPS improved by 28% in the same period to $0.50, coming in ahead of the consensus estimate of $0.45 - and marking the 16th consecutive quarterly earnings beat from Amphenol.
For the first nine months of 2024, Amphenol's net cash from operating activities reached about $2 billion, up from $1.7 billion in the year-ago period. Overall, the company closed the quarter with a cash balance of $1.6 billion, much higher than its short-term debt levels of $403.1 million.
Amphenol has positioned its IT Datacom segment as a critical growth driver. This end-market, representing 25% of total revenue, achieved an impressive 59% organic year-over-year growth, driven by strong demand for products supporting AI applications and core IT Datacom infrastructure. For FY24, the company projects over 50% growth in this segment, supported by the rapid expansion of AI computing, which has intensified demand for data center interconnect products.
High-speed fiber interconnect solutions are crucial for building advanced data center networks, and Amphenol's AI-focused portfolio includes storage connectors, high-speed I/O, mezzanine connectors, and card edge connectors, along with other connectivity solutions tailored to AI and machine learning applications.
On the acquisition front, Amphenol has been active in strengthening its market position. In early October, it finalized the acquisition of Lütze Europe, adding $100 million in annual revenue from the harsh environment cable and cable assembly market. Additionally, on July 18, Amphenol announced the $2.1 billion acquisition of the Mobile Networks business from CommScope. This acquisition, expected to contribute approximately $1.2 billion in revenue with a 25% EBITDA margin, brings advanced antenna and interconnected products into Amphenol’s expanding portfolio.
Analysts have an average rating of “Moderate Buy” for APH stock, with a mean target price of $77.28, which denotes an upside potential of roughly 5.6% from current levels. Out of 15 analysts covering the stock, 10 have a “Strong Buy” rating and 5 have a “Hold” rating.
