Story
AI Infrastructure Remains Supply-Constrained Ahead of Earnings, Stifel Says
Summary
Investment firm Stifel reports that AI infrastructure companies are supply-gated, not demand-limited, and expects most to beat estimates and raise guidance during the upcoming earnings season.
Stifel analysts report that artificial intelligence infrastructure companies remain constrained by supply rather than a lack of demand heading into the June and July earnings season. The investment firm expects most companies in the sector to continue their recent pattern of beating analyst estimates and raising future guidance.
Market Pullback Seen as a Correction
The analysis comes after the PHLX Semiconductor Index (SOX) fell approximately 8% in the first week of July. According to Stifel, this decline represents a "valuation correction within an intact cycle," rather than a fundamental break in demand for AI technologies.
The firm attributed the recent weakness to several factors, including reports of Meta's potential cloud entry, headlines regarding high-bandwidth memory (HBM) supply, and a more hawkish repricing by the Federal Reserve. Stifel also noted that the market's negative reaction to Samsung's strong preliminary Q2 results suggests that investors have very high expectations, where even in-line results may be interpreted as a miss.
Stifel's Outlook by Sector
Stifel emphasized that strong underlying fundamentals persist, with backlogs, long-term agreements, and capacity commitments continuing to extend across the compute, optical, and electronics manufacturing services (EMS) sectors. The firm highlighted several of its preferred stocks heading into the reporting period.
AdProcessors
- Nvidia (NASDAQ:NVDA): Named as the preferred large-cap stock, with Stifel expecting continued strength from its Blackwell platform and early orders for its next-generation Vera Rubin architecture.
- AMD (NASDAQ:AMD): Also highlighted for accelerated compute. The firm noted AMD's EPYC server-CPU franchise has a total addressable market (TAM) forecast to exceed $120 billion by 2030. An upcoming "Advancing AI" event on July 23 was identified as a potential catalyst.
Optical and Supply Chain
- Lumentum (NASDAQ:LITE): Stifel shifted its near-term preference to Lumentum, which it identified as the primary merchant supplier of EMLs (electro-absorption modulated lasers) into a market with a supply-demand imbalance estimated at 30% and widening.
- Jabil (NYSE:JBL): The supply chain partner raised its fiscal 2026 AI-related revenue forecast to approximately $13.6 billion from $9 billion last year.
- T T M Technologies (NASDAQ:TTMI): The firm noted the company's backlog grew 52% year-over-year to $787 million, with a book-to-bill ratio of 1.41.
- Ciena (NYSE:CIEN): The networking equipment company holds a record backlog of $7.7 billion and sizes its addressable market at roughly $50 billion by 2029.