2 Stocks to Buy Now as Google Raises Its AI Spending Forecast Yet Again

The artificial intelligence (AI) boom continues to fuel one of the biggest spending cycles the technology sector has ever seen, and Alphabet (GOOGL) is showing no signs of easing off the accelerator.

The Google parent has once again increased its 2026 capital spending forecast to $195 billion to $205 billion, up from its earlier outlook of $180 billion to $190 billion, with most of that investment directed toward expanding AI infrastructure.

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While investors became cautious after free cash flow turned negative last quarter, the higher spending reinforced that demand for AI computing power continues to outpace supply. This news is expected to benefit Google suppliers Lumentum Holdings (LITE) and Celestica (CLS).

Lumentum is benefiting from rising demand for the optical networking components that move massive volumes of data across AI data centers. Meanwhile, Celestica supplies the advanced electronics manufacturing and networking infrastructure that hyperscale customers need to support their expanding AI deployments.

Not every AI supplier shared in the optimism. Broadcom (AVGO) holds concerns that it could lose some tensor processing unit business to MediaTek, even though Morgan Stanley (MS) recently described Broadcom as a "core AI winner."

The market's reaction shows investors are becoming more selective. As Google commits even more capital to AI, Lumentum and Celestica appear especially well positioned to benefit from the company's next phase of infrastructure expansion.

Based in San Jose, California, Lumentum develops advanced optical and photonic technologies that power communications networks and a wide range of industrial applications.

With a market cap of $64.9 billion, Lumentum's portfolio spans high-performance laser systems used in semiconductor manufacturing, solar production, display technologies, electric vehicles (EVs), and battery manufacturing, giving it exposure to multiple long-term growth themes.

If AI has become the market's favorite story, Lumentum has been one of its biggest beneficiaries. LITE stock has skyrocketed 665.7% over the past 52 weeks and gained 113.7% year-to-date (YTD), driven by surging demand for its optical networking components.

As hyperscale data center operators increasingly swap copper connections for faster optical links, Lumentum has found itself in the sweet spot of the AI infrastructure buildout.

Naturally, that kind of performance has come with a lofty valuation. LITE stock is currently trading at 101.26 times forward adjusted price-to-earnings. The figure sits well above the industry average and its own five-year historical multiple, showing that investors are willing to pay up.

The company's latest quarterly results only reinforced the bullish narrative. On Tuesday, May 5, shares gained 1.88% after Lumentum reported Q3 FY2026 earnings that exceeded analyst expectations. Revenue increased 90.1% year-over-year (YOY) to $808.4 million, topping the $805.4 million analyst estimate.

Robust demand across the Components and Systems business drove the growth, while laser chips and products such as pump lasers continued to benefit from AI-related spending and improving scale.

Delving deeper, gross margin expanded by 540 basis points, while operating margin improved by 700 basis points. Better execution, disciplined pricing, and a richer product mix boosted bottom-line growth. Adjusted EPS came in at $2.37, representing 315.8% YOY growth and surpassing analysts' estimate of $2.24.