Amidst the tech craze caused by the emergence of generative AI solutions, there is a stock that may have been overlooked.
The 2023 artificial intelligence (AI) craze spotlighted the world’s biggest tech giants like Nvidia (NASDAQ:NVDA), which saw an unprecedented stock market ascent amid sky-high demand for its sophisticated chips. But amidst this fervor, another stock may have warranted a closer look: Cloudflare (NYSE:NET), a tech company dedicated to crafting tools that enable clients to create AI applications.
Cloudflare, a Hidden AI Gem?
As the AI boom took the world by storm in 2023, most investors and analysts have been understandably fixated on tech giants like Nvidia, Microsoft (NASDAQ:MSFT), and Amazon (NASDAQ:AMZN). However, amid this spotlight, one company with a significant AI footprint may have slipped under the radar.
Cloudflare, a well-known name in the US tech sector that offers content delivery network and cloud cybersecurity services, isn’t an AI-first company, but it has a product lineup its clients use to make AI work for them.
In other words, the company develops tools for its clients to build AI apps on its network. This enables Cloudflare’s customers to build assistant and generative AI solutions with pre-trained custom models and deploy plugins akin to ChatGPT, SiteGPT, and Leonardo. AI.
Moreover, Cloudflare’s CEO, Matthew Prince, recently said that his company agreed to a significant deal with one of the biggest AI companies in the world.
While Prince didn’t refer to this company by name, there are strong indications that it may be ChatGPT maker OpenAI, a Cloudflare customer.
“One of the fastest growing generative AI company expanded their relationship with Cloudflare, signing a one year $1.7 million contract, less than a year after first starting to use our platform.”
– said Prince on the company’s August earnings conference call.
Cathie Wood Backed Cloudflare, Sentiment Around the Stock Mainly Positive
With a clear potential to thrive in the AI frenzy, not all investors have let Cloudflare slip under the radar. Notably, Cathie Wood’s ARK Invest recently sold some of its stakes in Nvidia and Tesla (NASDAQ:TSLA) and invested a part of that capital in Cloudflare.
Although the company’s shares already rose significantly in 2023, over 52%, investors and analysts have solid reasons to believe that momentum could continue.
The company’s last quarterly report displayed a year-over-year revenue growth of 32% to $308.5 million, while earnings rocketed 900% to 10 cents a share. It marked the eighth quarter of earnings growth of 133% or higher.
Meanwhile, analysts’ consensus rating on Cloudflare’s stock is ‘Hold,’ based on coverage by more than 20 analysts. After the most recent earnings report, Wells Fargo (NYSE:WFC), Goldman Sachs (NYSE:GS), and Mizuho boosted their price targets on Cloudflare, with the average 12-month price objective now sitting at $68.42, 4.6% higher than its current share price.
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