Fabrinet FN helps big tech companies, including Nvidia, by making small, precision parts used across AI data centers, telecom, and beyond.

FN has averaged 13% revenue growth over the past six years, and its earnings have surged. AI data center chip powerhouse Nvidia is one of Fabrinet’s largest clients, and FN landed a potentially major partnership with Amazon in mid-March.

The stock has roughly tripled the Tech sector’s performance since its 2010 IPO, and FN has crushed the broader technology space during the past three years, soaring 82% compared to Tech’s 29%. This behind-the-scenes tech stock trades at a solid discount to its sector despite its near-term and long-term outperformance.

Fabrinet is trying to find support at a long-term moving average, and it trades 30% below its all-time highs.

Why This Under-the-Radar Tech Stock Is a Strong Buy

Fabrinet is a leader in advanced optical packaging and precision optical, electro-mechanical, and electronic manufacturing services for original equipment manufacturers of complex products.

Simply put, Fabrinet’s offerings help other tech companies make the small, complex parts they need for their products.

Fabrinet is a behind-the-scenes firm with offerings that are becoming more critical by the day as AI hyperscalers and others race to build more data centers. For instance, some of its tech is used in data centers to help send information at lightning speeds, enabling AI programs to run smoothly.

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Nvidia NVDA is one of Fabrinet’s largest clients. The graphics chip powerhouse reportedly accounted for roughly 35% of Fabrinet’s FY24 sales. Networking equipment giant Cisco Systems and optical components standout Lumentum are two of its other most important clients.

Fabrinet and Amazon AMZN entered into an agreement on March 12 for Amazon to buy warrants to purchase up to 381,922 shares of Fabrinet at $208.4826 per share. The deal incentivizes Fabrinet to deepen its role within Amazon’s supply chain to help support the growth of its AI infrastructure.

FN has averaged 13% revenue growth over the past six years. It is projected to grow its FY25 (period ending in June 2025) revenue by another 18% and 12% in FY26, reaching $3.78 billion—up from $2.88 billion in FY24.

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The company’s consensus earnings estimates have jumped since its Q2 FY24 release, helping FN earn a Zacks Rank #1 (Strong Buy).

Fabrinet is expected to grow its adjusted earnings by 16% in FY25 and 11% in FY26, following 16% expansion last year. FN has also consistently topped our EPS estimates.

Now Is a Great Time to Buy Fabrinet on the Dip

Fabrinet shares have soared 930% in the past 10 years, more than tripling the Zacks Tech sector and matching Amazon’s performance. The stock has ripped 1,700% higher since its 2010 initial public offering, compared to Tech’s 590% run.

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This leader in advanced optical packaging and beyond has climbed 82% during the last three years, leaving Tech firmly in its rearview mirror once again.

Yet, investors can buy FN stock 30% below its highs. Fabrinet is attempting to find support near its long-term 21-month moving average, with its RSI at some of its most oversold levels since 2018.

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On the valuation side, Fabrinet trades at a 15% discount to the Tech sector and 35% below its own highs at 20.4X forward 12-month earnings. FN is trading at its five-year median in terms of forward earnings, even though it has climbed 270%.

Why This Picks-and-Shovels AI Stock Is a Must-Buy

Fabrinet plays a critical behind-the-scenes role in the data center boom and the artificial intelligence revolution, which is likely to be measured in decades. The AI selloff, which was long overdue, gives investors a chance to buy FN at a far more reasonable price and valuation.

The company’s proximity and direct connection with Nvidia and Amazon will be beneficial going forward as they fuel the AI arms race. Plus, Fabrinet is a well-run company with a stellar balance sheet, holding more cash and equivalents ($935 million) than total liabilities ($699 million).

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This article originally published on Zacks Investment Research (zacks.com).

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