AI related investment has become a key pillar of US economic growth, and all that new computing power needs physical plumbing. That means switches, high speed optics, and dense servers that keep the AI boom running. Investors focused only on software risk missing this hardware layer. This article looks at three stocks from our AI infrastructure screener that sit closest to that spend and explains what makes each one interesting now.
The stocks highlighted below are just a small sample, and the full AI networking and servers screen surfaced 137 more hardware companies with equally compelling stories that are not covered here. If you want to identify which of those could fit your own portfolio thesis, head straight into the AI - Networking and Servers screener .
Cisco Systems (CSCO)
Cisco Systems is best known for the networking hardware that keeps the internet running, and its role in AI comes from the same place, through high capacity data center switches and optical links that tie together compute clusters for cloud and enterprise customers.
Cisco generated about US$63.3b from its Computer Networks segment, covering switching, routing and related services across the United States and international markets, and the group has a market value around US$439.1b.
Cisco's AI story is not just about selling faster switches and optics into hyperscale data centers. It is also testing those systems on itself, wiring AI deeper into internal workflows to show customers what an AI ready network can actually do.
"The rollout transitions Cisco from experimental pilot programs to standardized, autonomous agentic workflows across sales, engineering, finance, legal, and customer support."
What happens when that internal AI push either scales smoothly or hits friction could shape how investors think about Cisco's future profitability.
If you want to see how that profitability question ties into Cisco Systems' AI roadmap, read the full narrative for Cisco Systems for what the internal rollout could still change.
Hamamatsu Photonics K.K (TSE:6965)
Hamamatsu Photonics supplies the photodiodes, avalanche photodiodes and fiber optic modules that feed optical links inside AI data centers, while broader operations cover opto semiconductors, electron tubes, imaging equipment and lasers. Opto Semiconductor brings in about ¥88.6 billion, Electron Tube ¥77.7 billion and Imaging and Measurement Instruments ¥35.7 billion, within a business valued around ¥639.7 billion.
Hamamatsu Photonics provides exposure to the optical components of AI networking, where high speed detectors and fiber modules sit inside switches and transceivers. Forecast earnings growth of about 13.3% is paired with a P/E near 37x, so much depends on how a single pressure on data center optics demand develops.
That trade off between earnings expectations and a rich P/E makes the 1 key reward and 1 important warning sign feel like the key next step before deciding how Hamamatsu Photonics fits your AI thesis.
Littelfuse (LFUS)
Littelfuse builds protection, control and power components that sit around critical electronics, with its Electronics segment supplying surge protection and fuses used in data center networking gear, optical modules and server power subsystems. Electronics generated about US$1.47b of revenue, ahead of Transportation at roughly US$688 million and Industrial at about US$455 million, within a business valued near US$9.7b.
For the AI networking and servers theme, Littelfuse matters less as a box vendor and more as the quiet protection layer that keeps high voltage systems running safely in dense racks filled with switches, routers and optics. That positioning makes the next phase of its electrification push worth watching.
"Expanding adoption of high voltage architectures in data centers, grid and transportation applications is expected to increase Littelfuse content per system, with management targeting a 25 to 30% data center revenue CAGR over five years and citing 2 to 4 times higher content in future high voltage systems, which can support revenue growth and earnings."
What happens if one pressure on how effectively Littelfuse turns that extra high voltage content into sustained margin gains breaks the current script?
If that script is starting to look too neat, the full narrative for Littelfuse lays out where Littelfuse's high voltage upside could accelerate, stall, or quietly decouple from expectations.
Seeking Alternatives Before The Crowd?
Fresh ideas often move first, and the strongest momentum can show up quietly before prices start rising. Scan these under the radar for now, before the ideal entry window changes, then act according to your own approach.
-
Identify resilient balance sheets before momentum stories become crowded by tracking the curated list of solid balance sheet and fundamentals (24 results) , which filters for financial strength while it still goes largely unnoticed.
-
Track early power grid upgrades where electrification demand is building and review the curated 44 power grid technology and infrastructure stocks , which focuses on infrastructure players while the theme is still forming.
-
Consider infrastructure around AI rather than only the software narrative by reviewing the hand picked 54 AI infrastructure stocks , which highlights essential picks supporting the compute build out.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
