Investing in AI Infrastructure Stocks: Is Keysight a Good Choice?

TradingKey - AI infrastructure isn't just GPUs. Each advance in computing power relies on speedier networks, dependable interconnects, and exhaustive testing before systems are deployed. This is where the validation and measurement tools lie at the heart of the buildout. The growing demand for faster data center networking—from 400G to 800G and even to 1.6T and 3.2T qualifications—is driving a need for companies to guarantee these systems perform as designed. In this environment, Keysight (KEYS) has risen from a supporting player to the primary enabler.

How Keysight Performed After the Latest Earnings

Keysight Technologies shares surged 23% to an all-time high of $305.37 in Feb 24 after it reported first-quarter fiscal 2026 results that beat on all fronts. The top line was $1.60 billion compared to $1.30 billion in the prior year quarter; non-GAAP EPS of $2.17 beat a $2.00 consensus, and orders increased 30% to $1.645 billion. Since the spread between orders and revenue means that the backlog is building rather than being worked down, that’s an indication of strong demand. For the second quarter, management expects sales of $1.69–$1.71 billion and EPS of $2.27–$2.33, both higher than earlier forecasts. The company expects full-year fiscal 2026 revenue and earnings growth of “just over 20%,” which translates to approximately $6.4 billion in sales if met. Software and services represent 40% of total revenue, and recurring revenue is 29%, making Keysight more stable than pure hardware providers.

Analysts have become decidedly more bullish. Bank of America’s (BAC) price target is an implied upside of 20.08% and brings a Buy rating; Goldman Sachs Group (GS) reiterated the Buy rating and raised the target to $322, and JPMorgan Chase (JPM) also raised the price target to $300 and kept an Overweight rating. In total, 9 analysts currently rate the stock as a Buy with 3 Hold ratings. KEYS investors should understand that the re-rating is based on better growth and mix, and not just a side-effect of AI enthusiasm.

What Is Keysight?

Keysight is a leading technology company that helps electronic design, test, and measurement. The firm’s products are employed to test chips, optical links, and high-speed interconnects, as well as entire data center systems before wide-scale deployment. This quarter, the change of structure became evident: the Wireline business surpassed the Wireless for the first time in company history. That crossover shows a changing center of gravity away from traditional wireless testing and into computing, data center, and networking validation as hyperscalers invest heavily in AI infrastructure.

The Communications Solutions Group led the beat, with wireline orders increasing for the ninth consecutive quarter as customers moved to 800G and began qualifying 1.6T and 3.2T technologies. Keysight’s network analyzers and signal integrity tools are used at every step in the process. The Electronic Industrial Solutions Group also improved as semiconductor foundries added advanced packaging capacity for AI accelerators. In total, these business segments reveal the rationale as to why Keysight sits in the validation layer that de-risks and accelerates time-to-market for AI systems.

Bull and Bear Cases for Keysight in 2026

The Bull Case 

The bull case is based on visibility, mix, and secular demand. Orders of $1.645 billion were above the revenue estimation of $1.60 billion, which suggests a book-to-bill in excess of 1.0 and a growing backlog. That is not typical in test and measurement, and it indicates there is strong demand coming into the back half of the fiscal year. The move back toward Wireline, stimulated by data center speeds going from 400G to 800G and beyond, is secular, not cyclical, because validation needs increase as complexity increases. The increase in software and services contribution, as well as increasing recurring revenue, lend support to the margin sustainability. Stronger-than-consensus Q2 guidance and a full-year outlook for just-above-20% growth hint that the momentum is not only solid but could even be picking up if execution carries on its upward trend. These pieces may be in place to make the recent upgrades by analysts seem tame rather than overly optimistic.

The Bear Case

Valuation is the first obstacle. After a powerful rise, KEYS stock is trading above its five-year average; this reduces the margin of safety. If hyperscaler capital spending slows, pressure on test gear might abate sooner. Tariff and trade risks add another layer of uncertainty; Keysight has an international manufacturing base, and wider trade restrictions would squeeze cost and margins. There is also the risk that the current pace of network upgrades lengthens as customers come to terms with recent capacity. In other words, if growth missed or paused in orders, the impact would be magnified when the multiple is inflated.

What to Watch for Keysight

Near term, the focus is the next quarterly earnings report. Q2 results on April 28 will be the first test to see if “just above 20%” full-year growth can hold in the face of tariff and supply-chain noise. And business is business at the show. Nvidia (NVDA) will showcase next-generation networking architectures at the upcoming March GTC, and any reaffirmation of 800G-to-1.6T roadmap would be seen as positive for Keysight’s order backlog. And early-stage 6G trials also come into play; Keysight has numerous telecom agreements, and an accelerated 6G timeline would give it a growth runway through 2028.

Besides that, there are some operating indicators to look up for investors: the book-to-bill, a simple measure of demand health; shifts in product mix toward software, services, and recurring revenues impact gross margins and earnings volatility; comments from hyperscalers such as Meta Platforms (META) and Alphabet (GOOGL) (GOOG) on the AI infrastructure ramp will shape expectations for demand validation tools; and if there are tariffs changed or manufacturing is localized, perhaps due to different cost/delivery schedules.

Other AI Infrastructure Stocks to Consider

The validation theme expands out from Keysight and along the AI infrastructure stack. Teradyne (TER) is a leading semiconductor test provider. If Keysight validates networks, Teradyne validates silicon. AI has accounted for more than 60% of Teradyne’s overall revenue as advanced packaging and heterogeneous integration continue to grow in complexity. The stock hit all-time highs in February. Though the price has raced past the mean analyst target price, the high-end case incorporates further upside risk if AI test demand continues to be robust into 2027. For investors who want to play chip-level testing tied to the same secular drivers, Teradyne is a direct beneficiary.

On the hardware assembly side of AI infrastructure, Celestica (CLS) assembles rack-scale systems, switches, storage platforms, and AI server clusters for hyperscalers including Meta and Alphabet. The company delivered Q4 revenue growth of 44% year over year to $3.65 billion, and 2026 guidance suggests growth above 30%. Goldman Sachs has a $440 target, which would imply significant upside if execution continues to be strong. The Connectivity & Cloud Solutions business grew 64% in the last quarter, and that’s where AI cash is splashing across the supply chain.

Viavi Solutions (VIAV) provides a more under-the-radar play with fiber network test and monitoring for data center buildouts. Its stock has also been surging this year as it beefs up its fiber capacity with AI capacity. Viavi’s Network Enablement business jumped 36% in 2Q fiscal 2026 on growing data center ecosystem demand. Viavi, at around $6.7 billion market cap to Keysight's ~$52 billion, is the smaller scale, more leveraged play on the same validation theme, but keep in mind the greater volatility that typically entails in terms of investing in small-caps.

For those who want to gain diversified exposure to AI infrastructure stocks but without a focused bet on any particular scrip, Technology Select Sector SPDR Fund (XLK) offers general exposure to large technology companies in areas such as semiconductor equipment, IT services, and electronic instruments. With an expense ratio of 0.08%, it's a low-cost way to play the AI capital spending cycle while hedging some of the idiosyncratic risk.