Top Hardware Stocks for AI Growth, According to JP Morgan

Investing.com -- The artificial intelligence boom continues to reshape the hardware and networking sector, with JP Morgan highlighting several companies positioned to benefit from sustained AI infrastructure spending. As cloud service providers ramp up their multi-year investment plans, certain stocks stand out for their growth potential and relative valuation.

Arista Networks - JP Morgan ranks Arista Networks at the top of its hardware and networking picks. The firm notes that while investors are already looking for confirmation of 2027 bull-case estimates, companies are barely providing full visibility into 2026. ANET stands out as a company where the bull-case for 2027 can be affirmed. The bank emphasizes that AI-focused companies will need to demonstrate potential upside to consensus earnings estimates to maintain share price momentum. Arista’s combination of relatively discounted valuation multiples and stable to improving industry drivers positions it well against cyclical market downsides.

In a recent development, Arista Networks received several price target increases from firms including BofA Securities and Needham following its Analyst Day presentation, where it outlined new capabilities targeting Cloud and AI infrastructure.

Coherent - JP Morgan highlights that "AI could be the only thing that matters" for Coherent . Recent cloud service provider data points to robust spending increases in 2026 following exceptionally strong 2024 and 2025 performance. The bank notes that visibility into 2027 spending sustainability is increasingly driven by multi-year agreement announcements, similar to Broadcom’s deployment plan with OpenAI through 2029. These arrangements benefit both cloud companies seeking supply assurance and suppliers looking for sustained demand commitments to justify capacity expansion.

Coherent announced it secured $1.25 billion in new term loans through an amended credit agreement and also launched several new optical communication products, including a dual laser 100G ZR QSFP module.

Lumentum - According to JP Morgan, AI valuations are approaching peak levels but still below historical highs, with AI companies trading at approximately 70% premium to their historical average multiples. In contrast, cyclical companies like Lumentum are trading only in line with historical averages, suggesting limited expectations for end-market improvements. This positioning could provide opportunity as AI infrastructure spending continues to grow.

Lumentum priced a $1.1 billion convertible senior notes offering and expanded its Optical Circuit Switch product line with a new platform designed for lower-port-count applications in AI data centers.

TE Connectivity - JP Morgan believes valuation multiples leave room for upside in some AI companies despite high expectations. The bank specifically mentions TE Connectivity among companies favorably positioned heading into earnings season. With investors already focused on 2027 EPS across the sector, companies trading below or close to valuation multiples that investors are willing to accept in the current AI spending environment have potential for further gains, particularly if robust AI spending continues.

TE Connectivity reported third-quarter revenue of $4.53 billion and earnings per share of $2.27, exceeding analyst estimates. Following the results, the company received price target increases from both BofA Securities and Evercore ISI.

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