Nvidia’s success in the generative AI sector has been a boon for investors this year. AMD, Arista and Cloudflare have also seen a surge in value, hoping to gain from the forecast rise in generative AI. Each of these three stocks have had a growth of at least 100% in comparison to the Nasdaq.
Nvidia enjoyed a stellar year as its stock price rose 234% in light of the AI boom. This was primarily due to the demand for its processors used to train and operate large language models (LLMs). OpenAI, as well as other companies, adopted Nvidia's technology to develop software capable of transforming text prompts into images, poetry and PowerPoint presentations. Furthermore, Nvidia's net income increased sixfold in the first three quarters of the year. CrowdStrike, HubSpot and Salesforce also recorded impressive gains, doubling in value and far outperforming the Nasdaq which had risen 43% at the close of last Friday.
Other stocks such as the iShares Semiconductor ETF surged by 64% this year as investors saw potential in hardware and infrastructure for generative AI. Cloud service providers are expected to benefit as organizations increase technology expenditure for generative AI. Three other stocks gaining momentum from the generative AI wave are also discussed.
AMD, whose technology is expected to put a dent in Nvidia's AI chip dominance, has many admirers in the software programmer realm. As of Friday, their stock was up 116% this year. AMD recently introduced the MI300X AI processors, a market that CEO Lisa Su envisions will reach $400 billion in the next four years. Meta declared its intentions to utilize these processors in December and Microsoft is also a confirmed consumer. Su indicated that these processors have a higher performance capability than Nvidia's H100 chip. Deutsche Bank analysts remarked in a report to clients after the launch that "AMD remains very well situated to tap into the swiftly growing AI sector, given their ongoing customer partnerships and the roll out of products exhibiting formidable (and highly competitive) performance traits". After the launch, the stock rose almost 10%.
Since its public market introduction almost a decade ago, Arista has been making strides in catching up to Cisco in the data center networking gear sector. All the excitement surrounding their position in AI has helped to push the stock up 96% this year. In October, Arista implemented AI to a vital customer segment, and as a result, it has been referred to as Cloud and AI Titans. In the same month, the CEO, Jayshree Ullal, announced a goal of $750 million in 2025 AI networking revenue, causing Citi analysts to raise their price target on the stock to $300 from $220. Companies have been using Arista hardware to link their GPUs to the internet. With the models getting bigger and the workloads more complex, there is an opportunity for Arista to connect GPUs to each other so as to help magnify the technology. The Arista executives anticipate that enterprise spending will start to slow down in 2024 after numerous years of cloud expansion, and they expect that large-scale AI deployments are likely to start in 2025 when organizations have tested out the systems.
For years, Cloudflare has ensured fast delivery of online content to end users through its global network of data centers that guards websites against attempted takedowns. OpenAI is one of its key customers, and Cloudflare's technology verifies that an actual person, and not a bot, is attempting to access it. Now, the company's intention is to be part of the infrastructure that runs AI models while speeding up the response time. In September, Cloudflare unveiled Workers AI, which works on Nvidia's GPUs and is accessible in 100 cities. Morgan Stanley analysts, who have a "hold" rating on the stock, said in a November report that "a consumption pricing model for these services could result in meaningful growth in revenue as adoption increases through 2024." Cloudflare's shares have gone up 87% in 2023 so far. WATCH: Nvidia is ‘the cheapest’ AI play out there, top Bernstein analyst says for 2024
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