Al Root

Electrical components supplier Amphenol is showing investors one way to turn strength in artificial intelligence today into earnings growth tomorrow. Investors and Wall Street appear to be pleased.

Monday, Amphenol announced an agreement to acquire Trexon for $1 billion in cash. With expected 2025 sales of $290 million, Trexon makes electrical equipment for the defense industry, while Amphenol is active in aerospace and defense; the automotive and industrial markets; and the data-communications industry.

Amphenol shares rose 1.7% on Monday to $111.06, while the S&P 500 finished flat. Over the past 12 months coming into Tuesday trading, Amphenol stock had risen 67% as the company has benefited from the boom in spending on AI data centers.

"Today's acquisition of Trexon illustrates how Amphenol is both having their cake (i.e., capitalizing on current AI strength) and eating it too (i.e., redeploying capital)," wrote Baird analyst Luke Junk in a Monday report. "We remain positive on Amphenol as a best-in-class technology compounder."

A compounder is a company that deploys capital to grow organically and makes bolt-on acquisitions to generate consistent earnings growth. Junk rates shares Buy and increased his price target to $128 a share from $118.

About 15% of Amphenol's sales now come from aerospace and defense, but after the deal, that number should be closer to 16%. Amphenol is the much larger company with expected 2025 sales of more than $21 billion, according to FactSet.

"Trexon will ramp exposure relative to the Defense market that is currently witnessing robust demand trends," wrote J.P. Morgan analyst Samik Chatterjee in a Tuesday report. "Given the geopolitical issues across the globe, Amphenol has witnessed robust demand trends across the Defense market over [the] last few quarters, with organic growth rates ramping from high-single digits in [the fourth quarter of 2024] to high-teens in [the second quarter of 2025]."

Military spending in the U.S. typically grows at about 3% to 4% a year. Spending in Europe, however, is set to grow much faster because President Donald Trump has secured commitments from European nations to spend some 3% to 5% of gross domestic product on defense, up from recent levels closer to 2%.

Chatterjee rates Amphenol shares Buy and has a $125 price target for shares. Evercore ISI analyst Amit Daryanani rates shares Buy and took his price target up to $120 a share from $110 on Tuesday.

He is still focused on AI opportunities. "Notably, the company remains well positioned across hyperscalers, chipmakers, and [equipment makers] with the majority share in next-gen AI programs, spanning high-speed power, fiber optics, power management, and critical rack/tray level connections," wrote Daryanani. He projects $4 billion in AI-related revenue in 2025 and more than $6 billion in 2026.

Overall, 65% of analysts covering Amphenol stock rate shares Buy, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target for Amphenol stock is about $118 per share.

Barron's wrote positively about Amphenol stock in late January, believing AI spending would boost growth in sales and earnings. Shares were below $70 when the article appeared.

Amphenol stock was down 0.6% in early trading on Tuesday while the S&P 500 was down 0.2% and the Dow Jones Industrial Average was up 0.3%.

Write to Al Root at allen.root@dowjones.com

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August 19, 2025 09:55 ET (13:55 GMT)

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