On Wednesday, Evercore ISI reiterated its Outperform rating on Amphenol Corporation (NYSE:APH) stock with a steady price target of $125.00.
The firm's analysis suggests that Amphenol is a key supplier for the recently introduced NVDA NVL72 system, which could significantly boost the company's artificial intelligence (AI) revenue beyond its current $500 million plus. Amphenol's products, including copper cables and interconnects, are estimated to contribute between $100,000 and $120,000 in content per system.
The firm's assessment indicates that Amphenol is favorably positioned to capitalize on the surging investment in AI solutions by delivering advanced and efficient connectors for AI servers and networking. With its market leadership and unique product offerings, Amphenol is expected to excel in this sector. AI servers, which require 1.5 times more content than traditional servers, are anticipated to see their content grow at a compound annual growth rate (CAGR) exceeding 20%.
The NVDA NVL72's use of extensive copper cabling—over two miles for the GB200 NVL72 rack-scale GPU compute solution—presents a substantial revenue opportunity for Amphenol. Projections based on preliminary calculations suggest that by the calendar year 2026, this system could contribute approximately $700 million in revenue and $0.23 in earnings per share (EPS) to Amphenol, with potential to exceed $1.0 billion in revenue and $0.30 in EPS in the longer term.
The assumptions behind these figures include an estimated 11,000 GB200 NVL72 units sold in 2026, accounting for 30% of NVDA's $127 billion data center segment revenue, with an average selling price of around $3.5 million per system. Additionally, with 11,000 feet of copper cabling required per unit, the total copper opportunity is valued at $1.2 billion, of which Amphenol could secure a 60% share, translating to $700 million in IT/Datacomm revenue. This would result in a 25% incremental margin and a $0.23 EPS contribution.
Evercore ISI notes that this forecast is highly dependent on the number of units sold and Amphenol's market share for the copper cabling within the NVL72 system. While acknowledging the variables at play, the firm views the AI sector as a significant driving force for Amphenol's growth in the long term.
InvestingPro Insights
Amphenol Corporation’s (NYSE:APH) role in powering AI solutions has been recognized by Evercore ISI with an Outperform rating and a $125 price target. To further understand Amphenol's financial health and market position, let's consider some real-time data from InvestingPro. The company boasts a robust market capitalization of $67.82 billion and has demonstrated a strong commitment to shareholders by raising its dividend for 12 consecutive years. With a P/E ratio standing at 34.94, the stock trades at a high earnings multiple, indicating that investors may expect significant earnings growth in the future.
InvestingPro Tips highlight Amphenol’s status as a prominent player in the Electronic Equipment, Instruments & Components industry and its ability to maintain dividend payments for 20 consecutive years, which reflects financial stability and a shareholder-friendly approach. The company’s liquid assets surpass its short-term obligations, suggesting a solid liquidity position. In the last three months, the stock has seen a strong return of 19.15%, while the six-month price total return has been an impressive 38.16%. These figures demonstrate the company's robust performance and investor confidence in its growth trajectory.
For investors seeking a deeper dive into Amphenol’s prospects and to discover additional InvestingPro Tips, a visit to https://www.investing.com/pro/APH is recommended. There, you'll find 17 more tips that could help you make an informed decision about your investment. And remember, you can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, enriching your investment strategy with valuable insights.
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