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Artificial intelligence (AI) is the dominant theme in the stock market. Many investors are focused on a narrow group of leading AI stocks, like Nvidia, Microsoft, and Amazon. However, they might be overlooking great opportunities at the smaller end of the market.

Corning (NYSE: GLW) is a technology company that manufactures components for consumer electronics, medical equipment, data centers, and more. With a market capitalization of just $36.8 billion, Corning doesn't get as much attention as the trillion-dollar giants, but it's playing an increasingly important role in the AI boom.

The company will report its financial results for the second quarter of 2024 (ended June 30) on July 31, but management just told investors its revenue will come in much higher than originally expected. Here's why Corning is an AI stock to consider buying now.

Corning is becoming a key player in AI infrastructure

Corning specializes in components made primarily from glass, but that isn't as simplistic as it sounds. Glass is used in the displays for most consumer devices (like TVs, computers, and smartphones), but it's also used in the core of fiberoptic cables because it can transmit light very long distances with minimal signal loss compared to other materials. That is key to the fast transmission of data.

Corning's fiberoptic solutions are used in data centers of all kinds. But AI development requires hyperscale infrastructure that is typically fitted with Nvidia's graphics processing units (GPUs) and is managed by tech giants like Microsoft, Amazon, and Meta Platforms. AI developers need thousands of those GPUs clustered together to train large language models (LLMs), and they require a whopping 10 times as much fiber in the same physical space as traditional cloud data centers. That is a substantial opportunity for Corning.

The company's new RocketRibbon cable has a 60% smaller diameter than competing products while maintaining a high fiber count, which reduces its footprint. Considering hyperscale data centers often use thousands of miles of cabling, any space saved is a win for the operator.

In a conference call with investors following the first quarter of 2024 (ended March 31), Corning said it was accumulating significant customer wins for upcoming data center builds where it could generate hundreds of dollars in revenue per GPU. According to Nvidia, many data centers now run over 100,000 GPUs, so Corning's revenue opportunity scales nicely.

Corning just announced a big revision to its second-quarter forecast

Corning generated $3.2 billion in revenue during the first quarter of 2024, a 3% drop from the year-ago period. Its optical communications segment -- which is home to its AI data center initiatives -- contributed $930 million of that revenue, which was down 17% year over year. The declines were driven primarily by high inventory levels, which customers are still drawing down, but the company remains optimistic about its longer-term prospects.

In fact, Corning's 'Springboard' framework is a plan to add $3 billion in additional annual revenue in the coming years (that would represent 22% growth on its 2023 revenue of $13.6 billion). There are signs that AI is helping that plan come to life already because the company just announced an upward revision to its revenue forecast for the second quarter.

Corning originally expected to deliver $3.4 billion in revenue during Q2, but it now says that number could be $3.6 billion. The increase is driven by higher sales of -- you guessed it -- optical connectivity solutions for AI. The company will release its official Q2 results at the end of July.

Why Corning stock is a buy now

Corning isn't a hyper-growth company like Nvidia, but its stock is relatively cheap, which could pave the way for plenty of long-term upside. The company generated $1.67 in earnings per share over the last four quarters, and based on its stock price of $43.05 as of this writing, that places its price to earnings (P/E) ratio at 25.8.

That's a 20% discount to the 32.3 P/E ratio of the Nasdaq-100 index, which represents a cross-section of the largest technology stocks. Needless to say, Corning is far cheaper than individual AI stocks like Nvidia (P/E ratio of 75) and Microsoft (P/E ratio of 40.4). I'm not suggesting Corning is operating on the same level as those tech giants, but it has a clear opportunity in AI and an actionable plan to capture it.

If that isn't enough, investors who buy Corning stock today will also get a steady stream of cash flow. The company just declared a second-quarter dividend of $0.28 per share, which represents an annualized yield of 2.6%. That's higher than the dividend yields offered by both Nvidia and Microsoft.

Simply put, Corning stock presents a great opportunity for investors looking to diversify their AI holdings or even for investors looking to buy into the AI space for the first time.

Should you invest $1,000 in Corning right now?

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends Corning and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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