Celestica’s five named executive officers have sold $212-million of common shares since the end of October.Fred Lum/The Globe and Mail
The chief executive of Celestica Inc. CLS-T, the Toronto-based technology company that came back from the dead to strike it rich off the artificial-intelligence boom, sold $130-million in common shares over the past three months, cashing in as its share price took off like Nvidia Corp. NVDA-Q.
Celestica’s shares turned parabolic in mid-2023 and have risen more than 1,000 per cent since, but its stock price has particularly soared over the past five months. While the company makes equipment for the aerospace and defence industries, renewable-energy providers, electric-vehicle chargers and medical devices, its real money-maker lately is storage and network switches for AI-driven data centres.
With Celestica’s share price flying high, CEO Rob Mionis, who has shepherded Celestica’s turnaround since joining in 2015, sold a substantial amount of his share holdings – and fellow executives have followed suit.
In total, Celestica’s five named executive officers have sold $212-million of common shares since the end of October, according to regulatory filings. These executives are: Mr. Mionis, chief financial officer Mandeep Chawla, chief operations officer Yann Etienvre, and two division heads, Todd Cooper and Jason Phillips.
Investors have fallen in love with Celestica because its profits have surged, jumping to $426-million in fiscal 2024, from $244-million in fiscal 2023 and $146-million in 2022.
Lately, Celestica has been well positioned because its core business involves advanced manufacturing that is not easily replicated, and AI-related technology that is purchased by the major cloud-computing companies. These buyers are key because they keep shelling out gobs of money for data centres in order to stay relevant in the AI arms race.
The five largest cloud-computing companies, known as hyperscalers in the industry, now make up about 50 per cent of Celestica’s revenue.
Despite the success, the AI industry is also operating on less solid ground since the release in late January of China-based DeepSeek’s new AI model, which performed quite well and was developed for a fraction of the money spent building the data models that power the likes of ChatGPT.
If more AI products can be produced cheaply, it could rattle investors, because the current AI hype cycle is built on the expectation of more demand for sophisticated – and expensive – technology.
Once part of International Business Machines Corp. (IBM), Celestica was bought by Toronto-based private-equity firm Onex Corp. in 1996 and then taken public in 1998 during the dot-com bubble. It originally manufactured equipment such as fibre-optic cables for telecom companies, and as internet usage skyrocketed in the late nineties, demand seemed endless.
Yet within a few years, investors realized expectations for the sector were wildly overzealous and the bubble burst. Celestica’s share price crashed, as did the stocks of Canadian counterparts such as JDS Uniphase and Nortel Networks.
In the aftermath, Celestica’s share price languished for two decades, and amid this drought the company hired Mr. Mionis, a former aerospace executive who remains based in New Hampshire. The new CEO – who was paid US$34.3-million between 2021 and 2023 – initiated a different strategy, focused on higher-end manufacturing, but investors stayed away.
In early 2023, Onex Corp. announced it would exit its investment and sold shares in two tranches priced at US$12.40 and around US$20 each, the same levels Celestica shares traded for in 2004. Canadian money manager Letko Brosseau & Associates, then Celestica’s largest public shareholder, also announced plans to start selling down its 13-million-share stake around the same time.
Then came the AI boom, fuelled by the release of OpenAI’s ChatGPT.
Celestica’s shares jumped throughout 2023, but relative to Nvidia, investors were slow to pick up on the company’s exposure to the AI boom. Once they did, Celestica’s stock price soared like a cryptocurrency. In 2024, it shot up 247 per cent, while Nvidia’s climbed 171 per cent higher.
In a recent research note to clients, CIBC World Markets analyst Todd Coupland wrote that he believes Celestica’s major clients include Alphabet Inc., Meta Platforms Inc. and Amazon.com Inc., and forecast that in 2025 the division that houses its AI data-centre products will comprise 70 per cent of the company’s revenue and profit.
Despite the rich client base, Celestica’s shares have shown vulnerability to fears about China’s new, cheaper AI model. After DeepSeek was released in late January, its stock price fell 28 per cent in three days, but it has since recovered and Celestica is now worth $21.6-billion.
While investors were initially fearful about the release, RBC Dominion Securities analyst Paul Treiber wrote in a recent note to clients that cheaper models could actually help fuel even more investment in the sector. “The AI advancements from DeepSeek and others are likely to increase AI adoption over the long term,” he wrote, adding that rising usage could lead to more demand for Celestica’s high-performance switches.
With reports from Joe Castaldo and Sean Silcoff