Stock Story -
What Happened?
Shares of internet security and content delivery network Cloudflare (NYSE:NET) jumped 9.4% in the afternoon session as the debate around the future of AI continues following the unveiling of DeepSeek. The market is recalibrating and rotating to stocks that are not only more insulated if DeepSeek prevails in the AI arms race but to stocks that may actually benefit no matter who wins that race. The proliferation of AI will be a general tailwind to demand for cybersecurity, big data, and automation software.For example, AI can make bad actors better and make the search for vulnerabilities faster. This means that enterprises will need more of what CrowdStrike (NASDAQ:CRWD), Zscaler (NASDAQ:ZS) or Cloudflare offer. Additionally, more data is only valuable if the mountains of numbers, text, and videos can lead to actionable insights. AI can do exactly that, meaning that enterprises will get more value from platforms like Snowflake (NYSE:SNOW) and MongoDB (NASDAQ:MDB). Similarly, AI can make automation software more valuable by making it more adaptive, which means that customers can extract more value from platforms like ServiceNow (NYSE:NOW) and Appian (NASDAQ:APPN).
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What The Market Is Telling Us
Cloudflare’s shares are quite volatile and have had 16 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.The previous big move we wrote about was 11 days ago when the stock gained 5.3% on the news that Citi analysts upgraded the stock's rating from Neutral to Buy and raised the price target from $95 to $145. The new price target implied a potential 20% upside from where shares traded before the upgrade was announced.
Cloudflare is up 21.1% since the beginning of the year, and at $136.32 per share, has set a new 52-week high. Investors who bought $1,000 worth of Cloudflare’s shares 5 years ago would now be looking at an investment worth $7,537.