We recently compiled a list of the 11 AI News and Ratings You Shouldn’t Miss. In this article, we are going to take a look at where Cloudflare, Inc. (NYSE:NET) stands against the other AI stocks.
DeepSeek has quickly gained attention in AI with its R1 model, which delivers high performance at a lower cost. The company has introduced innovations to improve efficiency and accessibility in AI development. DeepSeek’s fast growth, despite having a small team, shows the increasing trend of AI-driven businesses scaling with minimal human resources. Its success also shows the broader shift toward open-source AI models, especially in China, where competition is driving faster innovation and more cost-effective solutions.
UBS’s Insights on DeepSeek R1 and AI Investment Strategies
In a report posted by UBS on January 31, the UBS CIO analyzed the impact of DeepSeek’s R1 model on financial markets and AI investment strategies. The firm expects continued capital spending by hyperscalers, benefiting semiconductor companies, and recommended diversified exposure across AI’s value chain. The declining cost of training large language models is driven by algorithmic advancements and hardware improvements, with R1 increasing AI adoption. Hardware scaling also remains important alongside algorithmic progress to support AI infrastructure investments.
In addition, China continues to play a significant role in AI innovation, with companies like Alibaba developing competitive models. UBS maintained a positive view of Chinese internet firms due to their ability to offer customizable, cost-effective AI solutions. The firm also highlighted the rise of AI-driven startups, emphasizing investment in firms with proprietary data or strong customer retention.
Furthermore, the rapid development of AI software suggests prioritizing physical infrastructure investments over traditional software. AI’s ability to self-improve introduces unpredictability, leading UBS to recommend structured products for volatility exposure while avoiding non-physical assets lacking a competitive advantage.
UBS believes that despite fluctuations, AI investment remains solid, with major tech firms expected to increase capital spending in 2025. AI adoption is also rising, supporting cloud growth and monetization. While volatility may be there due to economic and regulatory factors, AI’s long-term outlook remains positive, with both high-cost and low-cost models expected to coexist.
For this article, we selected AI stocks by reviewing news articles, stock analysis, and press releases. We listed the stocks in ascending order of their hedge fund sentiment taken from Insider Monkey’s database of 900 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close-up of a server array powering a cloud-services system.
Cloudflare, Inc. (NYSE:NET)
Number of Hedge Fund Holders: 44
Cloudflare, Inc. (NYSE:NET) offers cloud-based security, networking, and performance solutions for businesses across various industries worldwide.
On February 6, Cloudflare reported Q4 non-GAAP EPS of $0.19, surpassing expectations by $0.01, with revenue reaching $459.9 million, a 26.9% increase year-over-year, exceeding estimates by $7.78 million. Non-GAAP gross profit was $356.8 million with a 77.6% margin. For Q1 2025, Cloudflare projects revenue between $468.0 million and $469.0 million, below the $474.12 million consensus, and non-GAAP EPS of $0.16, missing estimates of $0.18. Full-year guidance forecasts revenue between $2.09 billion and $2.094 billion, with non-GAAP EPS of $0.79 to $0.80.
Co-Founder and Chief Executive Officer, Matthew Prince said that Cloudflare sees four main AI opportunities. First, like many companies, it is improving efficiency using AI, often using its own infrastructure. Second, AI makes its security and performance products better by detecting threats through machine learning. Third, Cloudflare Workers is emerging as a leading platform for AI applications, offering a cost-effective, serverless model for AI inference. The company’s AI Gateway also helps developers optimize costs. Finally, Cloudflare’s position between AI companies and content creators allows it to influence the evolving business model of the AI-driven web, shaping how content is managed and monetized.
Overall NET ranks 3rd on our list of AI stocks in news that investors shouldn’t miss. While we acknowledge the potential of NET as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NET but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Published by: Affan Mir
