The FTSE 100’s ‘best’ growth stock is up 119% in a year!

I don’t know many FTSE 100 stocks with the following qualities:

• Growing revenue at 72% year-on-year.
• Growing (adjusted) profit before tax at 87%.
• Share price up 119% in the last year.
• Interim dividend bumped up by 15%.

But I know one now. That’s Computacenter (LSE: CCC), the IT infrastructure specialist that just posted blockbuster results.

The stock has come out of seemingly nowhere to be one of the London Stock Exchange’s hottest properties. It was promoted from the FTSE 250 back in June on the back of the artificial intelligence (AI) boom. And no other FTSE 100 share price has increased so much in the last year (miner Glencore leads the rest of the pack with a 105% gain).

What’s most interesting is the shares might still be undervalued. The forward price-to-earnings ratio is just 22. That’s higher than the firm’s long-term average, but could be cheap for a company benefiting from elevated AI spending.

Is Computacenter a no-brainer buy then? Before I can say the answer is an emphatic ‘yes’, there are two questions that I think need answering.

Golden period

My first concern is how sustainable this is. AI is in a golden period at the moment, but is it fleeting? For example, one concern with AI titan Nvidia is that once hyperscalers have got all the advanced chips they need, earnings could fall off a cliff.

Could Computacenter be similar? Maybe. The company’s operations encompass a wide range of IT infrastructure. The recent boom comes from AI hyperscalers that need equipment to build out data centres. Think things like servers, computers, cabling and the like. The demand from this kind of hardware is the reason for the boost in Computacenter’s sales and profits.

So, while data centres play a key role in the ongoing proliferation of AI, I don’t think it’s unreasonable to assume Computacenter will be in a good spot. But what about when the music stops? That brings me to the next question.

Crash coming?

Will there be an AI stock market crash? The outrageous amounts spent on building out AI don’t match up with the return on investment – not yet at least.

While it’s impressive that this new technology is cracking long-standing maths puzzles (a few days ago, OpenAI claimed a solution to the Navier-Stokes Millenium Prize problem), the economic impact so far seems minimal. It’s hard not to draw parallels with the dotcom boom where there was a lot more hype generated than there was money. Of course, that was followed by the dotcom bust.

A crash of this kind would impact all AI stocks, I would think, and it’s hard to see Computacenter being an exception. Therefore, this is a risk to be aware of.

Overall, this might be a good opportunity for those wishing to invest in a FTSE 100 stock with exposure to a possible revolutionary new technology. I think the stock could be worth considering. Though I feel I have too much exposure already to artificial intelligence for me to take the plunge myself.

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John Fieldsend owns shares in Glencore and Nvidia.