4 Stocks to Buy for the Next Leg of the AI Rally

AI-driven demand for data-center hardware is powering a renewed rally in several hardware and platform names: Alphabet (GOOG, $3.8T) is buoyed by Gemini v3 and Waymo with top Street targets of $336 and $340, TTM Technologies (TTMI) is benefiting from AI chip-related PCB demand (LTM sales > $2.7B, Q3 2025 revenue $724M, AI data-center sales +22% YoY and ~170% YTD stock gain), Celestica (CLS, ~$35B market cap) reported Q3 EPS $1.58 and revenue $3.16B with Citi upgrading to Buy and a $375 target, and Amphenol (APH, $173B) posted Q3 revenue $6.19B and EPS $0.93 with shares doubling YTD. Technicals (price above 50- and 200-day SMAs, RSI and momentum oscillators) and strong earnings beats underpin the bullish case, though the article notes elevated volatility and short-term pullback risks.

Analysis

Market structure: The immediate winners are hardware-stack suppliers (TTMI, CLS, APH) and platform owners (GOOG) that capture incremental hyperscaler capex; direct beneficiaries will see revenue growth of 15–30%+ on AI-driven orders while OEMs with commodity exposure may face margin pressure. Pricing power concentrates up the stack — connectors/HD PCBs can sustain 5–10% price premia when lead times exceed 12–20 weeks, shifting margin share to suppliers and creating choke points in supply chains.

Risk assessment: Key tail risks are export controls/tariffs (China/US), a hyperscaler capex pause, or a 30–50% re-rating if AI monetization stalls; operational concentration (large customers: Alphabet/Meta/Microsoft) means single-customer demand shocks can cut supplier revenues >20% in a quarter. Near-term (days–weeks) risks are technical reversals (RSI resets, SMA breaches); medium-term (3–12 months) hinge on chip shipment cadence and backlog realization; long-term (1–3 years) depends on platform monetization and regulatory constraints on AI.

Trade implications: Favor long exposure to TTMI, CLS, APH, GOOG sized to 1–3% each with tactical use of defined-cost options (3–9 month call spreads) to cap premium; use pullback-to-50-day-SMA or RSI<55 as entries and place stops ~10–12% below entry. Consider pair trades: long suppliers (TTMI/CLS) vs underweight high-multiple AI software/consumer plays to isolate hardware demand; expect commodities (copper), rates (modestly higher real yields) and FX (USD strength) to react to sustained capex.

Contrarian angles: Consensus underestimates single-customer concentration and inventory risk — TTMI up 170% YTD is vulnerable to mean reversion if a hyperscaler pauses orders; the market may be overpaying for near-term growth while underpricing regulatory/export shocks. Historical parallels: previous capex booms (2016–18 ASIC/FPGAs) show supplier earnings can double then revert; watch backlog visibility and hyperscaler guidance as decisive leading indicators.

Key Decisions for Investors

• Establish a 2–3% long position in TTMI on a pullback to its 50-day SMA or if RSI falls below 55; target +30% over 6–12 months, set a tactical stop at -12% and scale out 50% of the position at +25% gains.
• Add a 1.5–2% long position in GOOG via a 3–6 month call spread (buy ATM, sell +20–25% OTM) to cap cost; exit or re-evaluate if GOOG closes below its 200-day SMA or if analysts cut revenue cadence guidance from hyperscalers.
• Establish a 1–2% long in CLS or APH (split 1% each) funded by buying 1% notional of 3-month puts on NVDA or TSLA as a hedge against a tech-wide multiple compression; reduce hedge if implied volatility for NVDA/TSLA drops >25%.
• Trim 30–50% of hardware supplier exposure if (a) a major hyperscaler issues a capex cut guidance, (b) TTMI backlog falls >20% QoQ, or (c) S&P 500 declines >5% within 7 trading days — these are concrete stop/triggers to protect against cascading demand shocks.