US Networking: Numbers going up, multiples going down - Top questions and feedback on our initiation

Bernstein remains positive on the US Networking & Communications Equipment sector, arguing AI infrastructure demand exceeds supply. The gap between ~40 GW in global demand and ~26 GW in US supply adds is not particularly worrying given an expanding ex-US buildout; if the US share of global data center capacity falls from 70% to 60%, the supply-demand gap disappears entirely. The team estimates AI end-user spend must reach ~$700B in 2027 for hyperscalers to earn a healthy ~15% ROI. It maintains Outperform ratings on CLS, CIEN, ANET, LITE and COHR, and Market-Perform on Cisco and Corning. The gap between sell-side consensus and hedge fund bogeys for Celestica is wider than anticipated; estimates were tweaked for dilution from its equity raise and the mix impact on 2027 margins, with the 10/27 investor day seen as a near-term catalyst. If the cycle turns, the rank order of resilience would be CSCO, GLW, ANET, COHR, LITE, CLS, CIEN.