The AI trade is often dominated by big names, so many compelling stories stay in the background just because of their small size. As the market prices in most of the AI developments among big names, investors and fund managers look towards hidden opportunities because that is what will define performance for them heading into the new year. Synnex Corp. (SNX) is one such stock, and according to Morgan Stanley, it is one of their top “Overweight” positions.
The firm’s bull thesis is quite simple. Memory cost will be a big issue in 2026, with memory cost inflation driving up costs for OEMs like HP (HPE) and Dell (DELL). SNX benefits from how well these OEMs do because it distributes their products. But it doesn’t have to worry about shrinking margins due to the higher memory costs. This way, it benefits from the AI spending, minus the drawbacks. Additionally, OEMs prefer established distributors in times of price volatility. Smaller distributors fade away amid such industry crises, which eventually helps companies like SNX consolidate their market further.
SNX is a global IT distributor that procures, deploys, and integrates various technologies. From data centers to personal computers and smartphones, SNX’s services and products ensure crucial functions of these industries operate smoothly. It was founded in 1980 and is present in over 100 countries, with its headquarters in California, United States.
The company’s stock is “only” up 32% in the last year, comfortably above the S&P 500 Industrials’ 16.92% returns. However, these returns pale in comparison to the many AI trades that have become multibaggers during the same period. This is precisely what makes the stock so attractive now.
SNX trades at a forward P/E of 11.55x, nearly 14% above its five-year average but almost half the IT sector average forward P/E of 23.8x. Compared to the trending AI stocks, this valuation is dirt cheap. But investors often step back when they look at the company’s gross margins. At 6.91%, the gross margins are nothing special. However, for a distribution business model, this is completely normal. SNX is not a hardware maker. Rather, it distributes other companies’ hardware and therefore doesn’t need to have comparable margins to many of the AI stocks in the market.
