Amphenol Corporation, a major player in the electronic and fiber optic connector market, has faced a stock downgrade from B of A Securities. Analyst Wamsi Mohan shifted the stock rating from Buy to Neutral and lowered the price target from $80 to $71. This decision stems from concerns regarding potential design changes in NVIDIA’s GB200-based AI systems.
According to Mohan’s research, issues with system overheating in NVIDIA’s GB200 systems may necessitate modifications that could impact Amphenol’s AI revenue prospects. Specifically, replacing Amphenol’s flyover cables with a printed circuit board (PCB) to address overheating could shrink Amphenol’s total addressable market. This potential design change could result in a significant content reduction, estimated at around $24,000, in NVL36- and NVL72-based systems.
These design adjustments, Mohan argues, could complicate Amphenol’s ability to meet its earnings per share (EPS) targets for 2025 and 2026, as these projections were based on higher content expectations. This potential reduction in content, if realized, could directly impact Amphenol’s financial performance in the coming years.
It’s important to note that Amphenol recently reported strong second-quarter results, with sales increasing by 18% year-on-year to $3.61 billion, exceeding analyst expectations. However, the concerns raised by Mohan regarding NVIDIA’s design changes cast a shadow over Amphenol’s future prospects in the AI market.
Investors seeking exposure to Amphenol can consider the Spear Alpha ETF (SPRX) and the AdvisorShares Focused Equity ETF (CWS). As of Wednesday’s market close, APH shares were down 1.44% at $61.02. This downgrade highlights the importance of staying informed about evolving trends and potential challenges within the technology sector, particularly in the rapidly evolving field of artificial intelligence.
