We recently compiled a list of the AI News Investors Should Not Miss. In this article, we are going to take a look at where Fabrinet (NYSE:FN) stands against the other AI stocks.

Companies are investing heavily in AI infrastructure to meet the growing demands of machine learning, data processing, and AI-driven applications. This spending is largely concentrated on building data centers, acquiring specialized hardware, and optimizing cloud infrastructure. According to a report by McKinsey, global AI infrastructure spending could reach up to $500 billion by 2027, highlighting the critical role it plays in the future of AI development. A large part of this investment is focused on AI-specific hardware like Graphics Processing Units (GPUs) and Application-Specific Integrated Circuits (ASICs), which are crucial for training and deploying AI models. NVIDIA, a dominant player in AI chips, has seen demand for its GPUs soar, largely due to their centrality in deep learning tasks. Jensen Huang, the CEO of the firm, has remarked that the AI boom is underpinned by massive infrastructure needs, and the market is just at the beginning of this growth curve.

Read more about these developments by accessing 33 Most Important AI Companies You Should Pay Attention To and 20 Industrial Stocks Already Riding the AI Wave.

Data centers are another focal point for AI infrastructure spending. AI workloads are highly demanding, requiring specialized facilities that can support high-density computing environments. Blackstone’s $16 billion acquisition of AirTrunk, a leader in AI-driven data centers, underscores the increasing importance of such infrastructure. The deal will add 800 MW of data center capacity, with projections to grow beyond 1 GW, a testament to the rising demand for infrastructure to support AI-driven applications. Cloud infrastructure is also a major area where companies are pouring resources. Cloud giants are increasing their investments in AI infrastructure. These companies are developing new AI-optimized cloud services to cater to businesses adopting AI. Gartner predicts that by 2026, cloud AI infrastructure spending will surpass $200 billion, as enterprises increasingly shift from on-premise AI deployments to scalable cloud-based solutions.

Thomas Kurian, the CEO of Google Cloud, recently remarked that AI is unlocking entirely new revenue streams for enterprises, and cloud infrastructure is the backbone enabling this transformation. Beyond just hardware, organizations are also investing in data management platforms and storage solutions to handle the massive amounts of data AI systems require. In fact, estimates suggest that the global AI data infrastructure market will grow at a compound annual growth rate of 18%, driven by increased data volumes and the need for real-time data processing capabilities. Companies are significantly ramping up their investments in AI infrastructure, focusing on hardware, data centers, and cloud computing. With projections showing continued growth in AI workloads, this spending will only increase in the coming years.

Read more about these developments by accessing 30 Most Important AI Stocks According to BlackRock and Beyond the Tech Giants: 35 Non-Tech AI Opportunities.

Our Methodology

For this article, we selected AI stocks by combing through news articles, stock analyses, and press releases. These stocks are also popular among hedge funds.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

An automated assembly line displaying the advanced packaging technology used by the company.

Fabrinet (NYSE:FN)

Number of Hedge Fund Holders: 31

Fabrinet (NYSE:FN) offers optical packaging, along with precision optical, electro-mechanical, and electronic manufacturing services. The company produces fiber-optic cables that power telecommunications, AI data centers, and the global Internet infrastructure. The company makes fiber-optic cables that are used to power telecommunications, AI data centers, and even the Internet across the world.

The datacom business of the company, which revolves around cable provision for AI data centers, has grown rapidly in the past two years. In the third quarter earnings call, Seamus Grady, the CEO of Fabrinet (NYSE:FN), underlined how this 150% jump in datacom revenue had benefited from the rise in demand for 800 gigs technology for AI applications. NVIDIA, one of the biggest winners of the AI craze, is the flagship customer for Fabrinet. The latter powers the data centers of the former with optical cables and electro-mechanical manufacturing services.

Overall FN ranks 34th on our list of the AI stocks investors should not miss. While we acknowledge the potential of FN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than FN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.

Disclosure: None. This article is originally published at Insider Monkey.