Alphabet's earnings late Wednesday have some investors concerned over continued growth in the spending required for data centers to match the expansion into artificial intelligence.
But the news that Big Tech's AI spending spree is continuing at a roaring pace is good news for other stocks -- particularly optical networking companies Lumentum and Coherent, according to Stifel analysts.
"The first hyperscaler print this earnings cycle reinforces our view that the AI data center buildout is not decelerating," they wrote in a note following Alphabet's results.
Hyperscalers refer to the largest tech companies that operate data centers globally, with Alphabet in good company alongside the likes of Amazon and Microsoft. These tech giants have all scrambled to get their hands on the necessary components for their data center ambitions.
Stifel analysts said Alphabet's earnings were positive for data-center exposed names that supply interconnects, optics and components underpinning the buildout.
Namely, Stifel highlights Lumentum Holdings, Celestica Inc, and Coherent Corp "as the most Alphabet-exposed names across hardware coverage."
The group also flagged Marvell Technology as a significant optical digital signal processor supplier, as well as Semtech Corp for its increase of active copper cable to Alphabet. Monolithic Power Systems Inc also carries "solid Alphabet exposure on the power side," the team at Stifel added.
"This initial read is overwhelmingly positive for the space and should skew positive for the CapEx spend insights from the other hyperscaler reports to follow," they added.
That means that the time is now to take a look at Lumentum and the other stocks -- before AI spending that could benefit the companies is confirmed by Google's peers. Microsoft is set to follow Alphabet's earnings on July 29 with Amazon due to report results on July 30.
Write to Jack Denton at jack.denton@barrons.com
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July 23, 2026 10:25 ET (14:25 GMT)
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