Q: Your answer earlier today suggested CLS was not reliant on AI sales and was lower valued than AI plays and should bounce back faster from this panic selling. Can you suggest a reason why it has plunged so far (-26% today) and performed so much worse compared to almost all the AI stocks?
5i Research Answer:
CLS is not exclusively tied to AI, but it is still a big part of their business, and has been a driver to much of its growth, especially switches for data centres. It does make sense for it to see some decline if investors fear slowing data centre growth. Its 'extra' decline is harder to explain, but it has had a very good run and still has a 192% gain over one year. Other data centre stocks did get hit very hard. Another possible reason is that as a third party manufacturer, investors may be worried that customers may not have enough extra business to throw CLS's way if there is a general tech spending slowdown. CLS typically thrives when customers are too busy, and if there is a slowdown then it may not see as many contract renewals.