Summary of J.P. Morgan's Hardware & Networking Sector Outlook Industry Overview - The report focuses on the **Hardware & Networking** sector, particularly the impact of **AI** on company performance and market dynamics leading into **2026** [1][38]. - The sector has experienced a **multi-year outperformance**, particularly driven by AI tailwinds starting in **2024** and continuing into **2025** [39]. Core Insights 1. **AI Valuation Premiums**: - The average AI company is trading at a **26% premium** to its historical multiples, indicating conservative investor expectations of **26% medium-term earnings growth** driven by AI [2][57]. - Initial outlooks suggest potential earnings growth acceleration of **60%-80%**, significantly higher than what is currently priced in [5][58]. 2. **Earnings Growth Expectations**: - Earnings acceleration of **60%-80%** is not fully reflected in current valuations, with investors pricing in only a **30% sustainable capex growth** [5][65]. - AI revenue exposure for average AI-levered suppliers is expected to rise from **27% in 2024** to **48% in 2027** [6][66]. 3. **Market Performance**: - The sector's share price performance has been significantly influenced by AI, with **AI companies outperforming non-AI companies** in both **2024** and **2025** [47]. - In **2024**, AI stocks saw a **73% increase** in share prices, with a **27% re-rating** contributing to this performance [10]. 4. **Investment Recommendations**: - Top picks for **2026** include **Arista (ANET)**, **Amphenol (APH)**, and **Celestica (CLS)**, with a focus on companies that leverage AI for growth [8][19][20]. - **Arista** is highlighted for its strong position in networking growth, while **Amphenol** benefits from increased fiber adoption in data centers [19][20]. 5. **Concerns and Risks**: - Investor skepticism regarding AI capex sustainability may limit valuation multiple re-rating, but earnings momentum is expected to drive share price outcomes [7][9]. - The report expresses caution regarding non-AI and cyclical companies, which may struggle due to prioritization of AI spending and supply chain constraints [16][17]. Additional Insights - **Capex Growth**: The report anticipates **52% capex growth** for AI companies in **2026**, driven by robust data center announcements from hyperscalers [11][12]. - **Networking vs. Compute Growth**: There is an expectation that networking growth will catch up to compute growth, with networking becoming a larger beneficiary of AI investments [14][15]. - **Memory Costs**: The impact of rising memory costs is noted, particularly affecting traditional infrastructure, while AI infrastructure is expected to be less price elastic [17][18]. Company Ratings and Price Targets - **Amphenol (APH)**: Overweight, target price **$160.00** by December **2026** [3]. - **Arista (ANET)**: Overweight, target price **$175.00** by December **2026** [3]. - **Hewlett Packard Enterprise (HPE)**: Overweight, target price **$30.00** by December **2026** [3]. - **Ingram Micro (INGM)** and **Insight Enterprises (NSIT)**: Downgraded to Underweight due to unfavorable enterprise spending outlook [17][18]. Conclusion - The Hardware & Networking sector is poised for continued growth driven by AI, with significant earnings upside expected in **2026**. Investors are encouraged to focus on companies with strong AI leverage while remaining cautious about non-AI sectors and potential supply chain challenges.

Core Insights - TimesSquare Capital Management's "U.S. Focus Growth Strategy" reported a gross return of 4.00% and a net return of 3.78% for Q3 2025, outperforming the Russell Midcap Growth Index's return of 2.78% [1] - Amphenol Corporation (NYSE:APH) is highlighted as a key investment, with a one-month return of -2.34% but a significant 71.52% increase over the past 52 weeks, closing at $129.24 per share with a market capitalization of $158.197 billion [2] - The company is recognized for its strong performance in the Information Technology sector, particularly in critical system provision and productivity-enhancing systems, with a notable 25% gain following a strong earnings report [3] Financial Performance - Amphenol Corporation's Q3 sales increased by 53% in US dollars and 52% in local currencies, reaching $6.194 billion [4] - The company contributed positively to the Baron Asset Fund's performance in Q3 2025, driven by rising expectations in data center spending due to accelerating AI adoption [5] Investment Sentiment - Despite Amphenol's strong performance, it is not among the top 30 most popular stocks among hedge funds, with 89 hedge fund portfolios holding the stock at the end of Q3, up from 81 in the previous quarter [4] - There is a belief that certain AI stocks may offer greater upside potential compared to Amphenol, indicating a competitive investment landscape [4]

Core Insights - The article highlights recent research reports on major stocks including Visa Inc., The Charles Schwab Corp., and Amphenol Corp., as well as micro-cap stocks Autoscope Technologies Corp. and United-Guardian, Inc. [2][4] Visa Inc. - Visa's shares have outperformed the Zacks Financial Transaction Services industry over the past year, with a gain of +11.1% compared to the industry's decline of -8.7% [4] - Total revenue rose 11% year-over-year in FY25, with cross-border growth at 13% [5] - The company faces rising client incentives and expenses, which may impact margin growth, with adjusted costs expected to rise nearly 11% in FY26 [6] The Charles Schwab Corp. - Charles Schwab's shares gained +21.8% over the past year, while the Zacks Financial - Investment Bank industry gained +37% [7] - The company is expected to maintain elevated expenses due to ongoing marketing investments, with a projected CAGR of 7% in expenses by 2027 [7][9] - Strategic buyouts and branch expansion efforts are anticipated to drive client assets, with total client assets expected to grow at a CAGR of 8.2% by 2027 [8][9] Amphenol Corp. - Amphenol's shares increased by +88.5% over the past year, slightly underperforming the Zacks Electronics - Connectors industry, which gained +89.8% [10] - The company benefits from a diversified business model and strong demand for high-speed and power interconnect products, with fourth-quarter 2025 earnings expected to grow between 62% and 65% year-over-year [12] - However, macroeconomic uncertainty and competition pose significant challenges [12] Autoscope Technologies Corp. - Autoscope Technologies has underperformed the Zacks Technology Services industry, with a decline of -5.5% compared to the industry's gain of +20.6% [13] - The company is focusing on AI-driven detection and multi-sensor integration, which supports future upgrades and broader use cases [13][14] - A new long-duration contract in Georgia enhances revenue visibility and diversifies its income sources [14][15] United-Guardian, Inc. - United-Guardian's shares have underperformed the Zacks Medical - Products industry, with a decline of -34.4% compared to -0.5% for the industry [16] - The company faces challenges such as declining profitability and operational strain, but it has strengths in expanding its pharmaceutical portfolio and stable medical products [17] - The upcoming launch of Natrajel is expected to provide a differentiated growth avenue [17]

Group 1 - Tech stocks are experiencing significant declines, with the Nasdaq down more than 1% and set to finish the week with losses [1] - Astera Labs, involved in AI infrastructure, saw its stock drop by 4.36% within a 15-minute timeframe [1] - Amphenol, a manufacturer of fiber-optic cables and connectors, reported a decline of 2.1% during the same period [2] - Coherent, another company in the components sector, experienced a 4.17% loss over a similar 15-minute window [2]

Core Viewpoint - Amphenol Corporation (APH) is rated as a Hold, with an expected 12% upside over the next 12 months based on an absolute valuation model [1]. Financial Projections - The valuation model assumes revenues will grow at an 18.4% compound annual growth rate (CAGR) over the next 10 years [1].

Core Viewpoint - The AI bull market is experiencing a resurgence, with new stocks leading the rally instead of traditional giants like NVIDIA and Microsoft [1][2]. Group 1: Alphabet Inc. - Alphabet Inc. (NASDAQ: GOOG) is positioned as a leader in the AI race, with a market cap of $3.8 trillion and significant advancements in AI technology, including the Gemini V3 upgrade and Waymo's driverless car service [3]. - Analysts from JP Morgan and Scotiabank have raised their price targets for Alphabet to $336 and $340, respectively, reflecting strong earnings performance in 2025 [3]. - Despite a recent four-day decline, GOOG shares show strong upside potential, trading above the 50-day and 200-day simple moving averages (SMAs) since July [6]. Group 2: TTM Technologies Inc. - TTM Technologies (NASDAQ: TTMI) is a key player in the AI sector, focusing on high-density printed circuit boards (PCBs) essential for AI systems, with a market cap nearing $7 billion and $2.7 billion in sales over the last year [7]. - The company reported a 22% year-over-year increase in quarterly revenue, driven by AI data center sales, and has a backlog in aerospace and defense approaching $1.5 billion [7]. - TTMI shares have surged nearly 170% year-to-date, with strong technical indicators suggesting continued upward momentum [9]. Group 3: Celestica Inc. - Celestica (NYSE: CLS) has seen significant growth due to demand for its products in AI data centers, achieving record quarterly EPS of $1.58 and revenue of $3.16 billion in Q3 2025 [10]. - The company's market cap has reached $35 billion, with annual sales projected to exceed $11 billion, and Citigroup has upgraded the stock to Buy with a price target of $375 [10]. - CLS shares are above both the 50-day and 200-day SMAs, indicating a strong uptrend, although recent momentum has shown signs of weakening [12]. Group 4: Amphenol Corp. - Amphenol (NYSE: APH) is a major supplier in the AI data center industry, providing essential components like connectors and cables, with a market cap of $173 billion [13]. - The company reported record revenue of $6.19 billion and EPS of $0.93 in Q3, surpassing analyst expectations by 12% and 17% respectively [13]. - APH shares have doubled year-to-date, with technical indicators suggesting continued strength despite recent volatility [16].

Core Insights - Amphenol (APH) shares have increased by 90.3% over the past year, significantly outperforming the Zacks Computer & Technology sector's return of 24.1% [1] - The company has experienced strong order growth, which rose by 38% year over year and 11% sequentially, reaching $6.11 billion [1] - Amphenol's diverse portfolio in fiber optic, power, antenna, and sensor technologies is gaining traction in datacom, aerospace, and defense markets [1][7] - The company's acquisition strategy has been a key driver of growth, with over 50 acquisitions in the past decade [8] Performance Comparison - Amphenol has outperformed peers such as TE Connectivity (TEL), Corning (GLW), and Belden (BDC) in the past year, with TE Connectivity and Corning returning 49.9% and 68.9%, respectively, while Belden shares fell by 8.2% [2] Growth Drivers - Rising AI workloads and cloud infrastructure upgrades are increasing demand for high-speed interconnects, benefiting APH's Communications Solutions segment [7] - Electrification in transportation and increased electronic content in medical devices are driving the adoption of Amphenol's cable assemblies and sensor-based systems [7] Acquisition Strategy - Amphenol continues to expand its market reach through targeted acquisitions, including the recent acquisition of Trexon for approximately $1 billion, expected to be accretive to earnings in the first year [8][12] - The pending acquisition of CommScope's Connectivity and Cable Solutions business will enhance Amphenol's interconnect product capabilities in the IT datacom market [10] Financial Strength - Amphenol reported operating cash flow of $1.47 billion in Q3 2025, representing 117% of net income, with free cash flow at $1.215 billion or 97% of net income [11] - Total liquidity at the end of Q3 was $10.9 billion, including $3.9 billion in cash and short-term investments, supporting further acquisitions and shareholder returns [12] - The company returned $354 million through dividends and share buybacks in Q3 2025 and raised its quarterly dividend by 52% to 25 cents per share, effective January 2026 [12] Earnings Estimates - The Zacks Consensus Estimate for Q4 2025 earnings is 92 cents per share, indicating a 67.3% growth year-over-year, with revenues expected to reach $5.84 billion, suggesting a 35.2% increase [13] - For the full year 2025, earnings are estimated at $3.29 per share, reflecting a 74.1% growth from 2024, with revenues projected at $22.74 billion, a 49.4% increase [14] Valuation - Amphenol shares are trading at a premium, with a forward 12-month price-to-earnings (P/E) ratio of 36.10X, higher than the broader sector average of 28.53X and peers like TE Connectivity and Corning [15] - The stock is currently trading above the 50-day and 200-day moving averages, indicating a bullish trend [18] Conclusion - Amphenol's diversified end-market exposure, expanding interconnect portfolio, and effective acquisition strategy support solid growth visibility, justifying its premium valuation [21]

Core Insights - Amphenol Corporation is a leading global provider of high-tech interconnect, sensor, and antenna solutions, serving various industries such as automotive, broadband communications, and aerospace [1] - The company faces competition from TE Connectivity and Molex in the electronic components sector [1] Institutional Interest - William J. Doherty, President of the CS Division at Amphenol, sold 80,000 shares of Class A Common Stock at approximately $142.00 each, indicating a disposition of securities [2] - Despite the sale, institutional interest in Amphenol remains strong, with BLI Banque de Luxembourg Investments acquiring 32,200 shares valued at around $3.1 million [3] - Norges Bank acquired a new stake in Amphenol valued at over $2.1 billion, while T. Rowe Price Investment Management Inc. increased its holdings by 196.3%, now owning over 16.7 million shares valued at approximately $1.1 billion [4] - UBS Asset Management Americas LLC increased its stake by 639% during the same period [4] Stock Performance - Amphenol's stock is currently priced at $141.49, reflecting a 1.63% increase, with fluctuations between $140.90 and $143.48 during the day [5] - Over the past year, the stock reached a high of $144.37 and a low of $56.45 [5] - The company has a market capitalization of approximately $173.19 billion, maintaining its status as a significant player in the electronic components industry [5]

Market Overview - The current market sentiment is positive despite some headwinds such as rising inflation and unemployment [1][2] - The Federal Reserve's actions on interest rates are anticipated to impact consumer behavior and market performance [2] AI Industry Insights - The AI sector, particularly companies like Nvidia, is expected to continue growing, although there are concerns about stock valuations and earnings performance [3][4] - Nvidia's recent earnings report led to a stock price decline, indicating potential weakness despite strong sales prospects [4] Investment Strategies - Investing in the "picks and shovels" of the AI industry, such as HVAC and data centers, is recommended as a more stable approach [5][8] - The HVAC ETF has shown a year-to-date increase of over 25%, outperforming sectors like crypto and data servers [7][8] Specific Company Performance - Comfort Systems and Amphenol are highlighted as top picks within the HVAC sector, with Comfort Systems up 120% and Amphenol up 100% this year [6] - The HVAC industry is characterized as a reliable sector driving growth for AI-related companies [8][15] Cryptocurrency Market - Bitcoin has experienced a 20% decline this month, but there is potential for recovery, suggesting it may be a buying opportunity [9][10] - The historical volatility of stocks like Amazon is referenced to illustrate the potential long-term value of holding onto investments like Bitcoin [10][12] Economic Indicators - Rising costs in essential areas such as food, housing, and education are impacting consumer affordability, despite lower gasoline prices [20][21] - The administration's focus on job creation and economic growth is seen as a potential driver for market opportunities, although challenges remain for consumers [22]

Core Viewpoint - Amphenol Corporation has demonstrated strong financial performance and growth potential, significantly outperforming the broader technology sector in recent months and years [2][3][5]. Financial Performance - Amphenol's revenue for Q3 2025 increased by 53.4% year over year to $6.19 billion, exceeding the consensus estimate of $5.48 billion, driven by high demand for interconnect solutions in IT datacom and communication networks [5]. - Adjusted EPS for Q3 2025 rose by 86% to $0.93, surpassing the Street's estimate of $0.79 [5]. - For fiscal Q4 2025, Amphenol forecasts sales between $6 billion and $6.1 billion, indicating a growth of 39% to 41% year over year, with adjusted diluted EPS projected between $0.89 and $0.91, reflecting a growth of 62% to 65% [5]. - For the full fiscal year 2025, sales are anticipated to be between $22.66 billion and $22.76 billion, with adjusted diluted EPS expected in the range of $3.26 to $3.28, representing annual increases of 49% to 50% and 72% to 74%, respectively [6]. Stock Performance - Amphenol's stock is currently trading approximately 3.9% below its November high of $144.37, but has rallied nearly 26.2% over the past three months, significantly outperforming the Technology Select Sector SPDR Fund (XLK), which gained only 7.9% during the same period [2]. - Over the past 52 weeks, Amphenol's stock surged by 89.4%, far exceeding XLK's 20.9% gain [3]. - Year-to-date, the stock has jumped 99.7%, again outperforming XLK's 20.9% rise [3]. - Since May, Amphenol has consistently traded above its 200-day and 50-day moving averages, indicating a sustained uptrend [3].