AKAM - 3 Data Infrastructure Stocks Poised to Soar on Skyrocketing Demand

2024-05-14 09:00:00 ET

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Datacenter power consumption is predicted to more than double in the next six years, thanks to datacenter expansion. This growth is needed to process the huge amounts of data that supports AI and machine learning. Of course, the use of AI and machine learning will rapidly grow in the coming years as more companies and government agencies utilize these tools on a wide scale. As a result, the demand for data will keep growing exponentially for the foreseeable future, causing the revenue generated by datacenters to soar. Additionally, the top and bottom lines of the firms that sell equipment to these datacenters ill surge going forward. For investors who want to exploit these trends, here are three top data infrastructure stocks to buy.

Akamai (AKAM)

Earlier this year, Akamai (NASDAQ: AKAM ) announced that its content delivery network would start offering cloud-computing services. So, it seems that the company is turning into a de facto owner and operator of datacenters.

Moreover, Akamai’s content delivery network sites are usually located very close to its customers’ offices. Consequently, its clients can utilize multiple applications, including AI and streaming media, more effectively. And Akamai’s customers can even deploy new offerings, including spatial computing, consumer and industrial IoT applications.

With Akamai becoming a datacenter operator and benefiting from competitive advantages compared to most existing datacenters, its long-term outlook appears bright.

Akamai has a low forward price-earnings ratio of 13.6 times.

Vertiv (VRT)

Vertiv (NYSE: VRT ) provides monitoring systems and power management products for datacenters. As a result, the company is ideally positioned to get a big boost from the proliferation of datacenters.

Last quarter the company’s orders soared 60% versus the same period a year earlier, bringing its backlog to a huge $6.3 billion. Further, its operating profit climbed 42% year-over-year. And if the firm’s adjusted operating profit comes in at the midpoint of its guidance range, the metric will increase 28% compared with 2023. The company is also benefiting from AI-driven demand.

Last month, prominent investment bank Oppenheimer started coverage of VERT stock with a $96 price target and an “outperform” rating. Oppenheimer referred to Vertiv as an AI infrastructure player. It’s well positioned for growth and wallet share gains due to sustainable competitive differentiation in datacenter power and thermal management.

Vertiv’s strong financial results and powerful, positive catalysts make it one of the top data infrastructure stocks to buy.

Arista Networks (ANET)

Arista Networks (NYSE: ANET ) sells datacenter hardware, such as switches, routing products and VPNs.

The company is well-positioned to gain market share in the $45 billion Ethernet network switches market. Its switches are able to integrate more easily into the most advanced chips than Cisco’s (NASDAQ: CSCO ) switches. As a result, Arista, with a 10% share of the Ethernet switches market as of last year, is poised to take share from Cisco, which had a 40% share.

Also importantly, Arista has a market-leading 35% share of the high-speed switching market, which are becoming much more prevalent in datacenters. Moreover, the latter trend is expected to intensify in the coming years.

On the date of publication, Larry Ramer held a long position in ANET. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines .

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