Artificial Intelligence (AI) Spending to Hit $631 Billion in 2028: 1 Magnificent Stock to Buy Right Now Before That Happens

Market research firm IDC recently released a report stating that the global artificial intelligence (AI) market is now worth $235 billion, and the bright side is that this technology still has a lot of room to grow over the next five years.

IDC estimates that global spending on AI and generative AI could reach $631 billion by 2028. There are several ways investors can take advantage of this massive opportunity. From hardware companies like Nvidia to software providers such as Palantir and cloud computing companies such as Oracleinvestors may be spoiled for choice when looking to buy AI stock right now.

Cloudflare (NET 5.04%)However, it may not be on the minds of many investors when looking for an AI stock to add to their portfolios. The company has made a name for itself in the cyber security industry by helping customers secure their internet connections while improving the reliability and quality of their connections. However, it is now making a concerted push into the AI ​​market as well.

Let’s take a closer look at Cloudflare’s AI-focused initiatives and see why this technology has the potential to supercharge its growth.

Cloudflare has set its sights on lucrative AI markets

Cloudflare has used its cybersecurity credentials to bolster its prospects in the cloud AI space. Last September, the company launched the Workers AI platform through which developers can run AI inference applications on Cloudflare’s network. The company has purchased Nvidia GPUs (graphics processing units) and network switches to build a leading AI network in cities around the globe that will allow developers to build AI applications without having to purchase any hardware own.

Cloudflare says it has now deployed GPUs in 180 cities globally. That number has the potential to grow, given that the company has data centers in 300 cities around the world. The company says it plans to “make it possible for any organization globally to start deploying AI models—powered by Nvidia GPUs, networking and inference software—without having to worry about managing, scaling, optimizing or securing implementations”.

In simpler words, organizations and developers who want to jump on the AI ​​bandwagon can simply rent Cloudflare’s infrastructure without having to incur the huge capital expenditures they would have if they bought their own GPUs and be deployed own servers. It’s worth noting that the infrastructure-as-a-service (IaaS) market that Cloudflare is targeting with this strategy is expected to be worth $580 billion in 2030.

In addition, the company currently has a platform of more than 1 million developers to sell its new services, such as Workers AI. However, Cloudflare won’t be limited to the cloud AI market. The company just announced a new AI offering called AI Audit. The tool will allow websites and content creators to see how AI bots access and use their content, give them the ability to block access and also charge for the content AI bots access.

In other words, Cloudflare could help content creators and websites offload AI companies, and it won’t be surprising to see this offering gain traction once it’s fully launched. That’s because the adoption of generative AI in content creation will grow at an annual rate of 31% over the next decade, according to Market.us.

Cloudflare is already growing at a healthy pace, and AI could give it a shot in the arm

When Cloudflare announced its second-quarter 2024 results in August, the company reported a 30% year-over-year increase in revenue to $401 million. Even better, the company’s adjusted earnings doubled year over year to $0.20 per share. Cloudflare’s impressive year-over-year growth in revenue and earnings can be attributed to its existing customers spending more money on Cloudflare’s offerings.

For example, the number of Cloudflare customers with annual revenues over $100,000 was 3,046 in the second quarter, up 30% year over year. That was higher than the 20% year-over-year growth in Cloudflare’s paying customer base last quarter. Moreover, the company’s dollar-based net retention rate of 112% in Q2 indicates that its existing customers have either increased their adoption of Cloudflare’s new offerings or are using more of its current services.

This metric compares the company’s revenue in a quarter to revenue from the same customer cohort in the year-ago period, so a reading above 100% means it’s been able to win a larger share of its existing customers’ wallets. Add in the additional revenue opportunities likely to open up thanks to the company’s growing portfolio of AI offerings, and there’s a good chance Cloudflare will maintain robust growth over the long term.

As it turns out, analysts expect Cloudflare’s earnings to grow at an annual rate of 62% over the next five years. That’s why investors looking to add a growth stock to their portfolios would do well to buy Cloudflare before stepping on the gas, after a steady market performance so far in 2024.