AVT vs. ARW: Which AI Supply Chain Stock Is the Better Buy?

Avnet, Inc. AVT and Arrow Electronics, Inc. ARW are two crucial players in the global electronic components distribution industry, serving as key supply chain partners for semiconductor manufacturers and technology companies. Both companies are benefiting from accelerating investments in artificial intelligence (AI), cloud computing, data centers and industrial automation, which are driving demand for semiconductors and related components.

Given the major tailwind, let’s analyze their business models, risk profiles and long-term outlooks and examine which one looks like the better investment right now.

The Case for AVT Stock

Avnet is benefiting from strong demand in AI infrastructure, networking and industrial markets. In the third quarter of fiscal 2026, the company reported revenues of $7.1 billion, up 34% year over year and 13% sequentially. Avnet’s networking and industrial markets were the biggest growth drivers during the third quarter. AI-related demand is becoming a larger part of AVT’s business.

In the third quarter of fiscal 2026, management stated that the company’s direct exposure to AI and data center customers has increased from around 5-7% previously to nearly 10-15% now. Most of this business is tied to Asia, especially Taiwan, where demand from hyperscalers and server customers remains strong. The company is also benefiting from demand for components that support AI infrastructure.

AI buildouts are increasing demand for products tied to power management, cooling systems, connectors, capacitors, resistors and sensors. This helped AVT’s interconnect, passive and electromechanical (IP&E) business grow 25% year over year in the quarter. AI accelerators require surrounding IP&E products, creating additional sales opportunities beyond semiconductors.

Growing backlog levels and book-to-bill ratios supported by rising lead times across several component categories benefit AVT. Despite higher volumes, Avnet’s gross profit margin was 10.4% in the third quarter of fiscal 2026, down 70 basis points from the year-ago quarter, reflecting a higher mix of Asia sales and product/customer mix shifts in the Western regions. A large portion of the sales growth involved costly memory products.

For the fourth quarter of fiscal 2026, AVT expects revenues to be in the range of $7.3-$7.6 billion, implying approximately 5% sequential growth at the midpoint. The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $7.46 billion, implying year-over-year growth of 32.8%. The Zacks Consensus Estimate for AVT’s fiscal 2026 earnings indicates year-over-year growth of 49%. Estimates have remained unchanged in the past 60 days.

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The Case for ARW Stock

Arrow Electronics serves as a critical distribution partner for semiconductor and electronic component manufacturers targeting major industries and markets. Arrow Electronics provides solutions for electronic component distribution, semiconductor supply, embedded computing and engineering services for OEMs, industrial manufacturers, automotive suppliers, communications equipment vendors and data center customers.

Arrow Electronics’ engineering services division provides value-added design support that helps customers integrate complex chipsets and solutions, creating sticky relationships that generate recurring revenues. In first-quarter 2026, Global Components sales increased 39% year over year to $6.64 billion, while operating income more than doubled to $363.5 million.

Furthermore, the company's technical expertise in high-performance computing, memory solutions and specialized processors gives it competitive advantages in serving customers developing technology-enabled products across automotive, industrial, healthcare and telecommunications sectors. Arrow Electronics’ diverse customer portfolio spanning multiple industries and geographies provides fundamental stability and growth opportunities.

ARW doesn’t face customer concentration risk as no single customer accounted for more than 2% of the company’s 2025 consolidated sales. Arrow Electronics has made substantial investments in digital capabilities that are fundamentally transforming its operating model and margin profile. The company's digital platforms provide customers with real-time inventory visibility, pricing transparency and streamlined procurement processes.

Arrow Electronics undertakes these strategic investments while also demonstrating impressive cash flow generation capabilities. Alongside robust cash flow, ARW also maintains strong profitability. ARW’s non-GAAP operating income rose to $401 million, and the non-GAAP operating margin expanded 160 basis points in the first quarter of 2026. The Zacks Consensus Estimate for ARW’s second-quarter 2026 earnings suggests year-over-year growth of 83%. Estimates have been revised upward in the past 60 days.

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AVT vs ARW: Price Performance & Valuation Check

Avnet shares have risen 83.8% year to date, while Arrow Electronics has soared 93.5%

YTD Performance Chart

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On the valuation front, Avnet trades at a forward 12-month price-to-sales (P/S) multiple of 0.26X, above its median of 0.20X, while Arrow Electronics trades at a P/S multiple of 0.29X, above its median of 0.21X.

Forward 12-Month (P/S) Valuation Chart

Image Source: Zacks Investment Research

Conclusion: AVT vs. ARW

Both Avnet and Arrow Electronics are benefiting from the AI infrastructure spending cycle, strong semiconductor demand and improving industrial markets. Avnet stands out for its expanding AI exposure, growing IP&E business and healthy revenue momentum, while Arrow Electronics benefits from broad customer diversification, engineering expertise, digital investments and stronger margin expansion.

Although both stocks have rallied sharply and trade above their historical valuation medians, Arrow Electronics appears to have a slight edge due to stronger earnings growth expectations, upward estimate revisions and improving profitability. However, Avnet remains an attractive long-term investment for investors seeking exposure to the AI-driven electronic components distribution market. Given these factors, we believe ARW is a better investment right now.

ARW sports a Zacks Rank #1 (Strong Buy), while AVT carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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