Until now, the AI wave has been primarily about building infrastructure. Which has been a clear advantage for chip makers like Nvidia and companies that run large data centers and cloud services like Amazon, Microsoft, and Alphabet. This has contributed to a huge boost for companies, perhaps Nvidia in particular.
But technology analysts believe the next big hurdle in AI infrastructure is network solutions.
Expenses grew by 34 percent
– Although Nvidia and its graphics processors get most of the attention in generative AI, we see networking as an important companion in devices that support models and applications like ChatGPT, Morningstar analysts wrote in a report.
At Morningstar, they predict that the need for fast networking solutions in generative AI will drive “strong, long-term growth for well-positioned network providers.”
According to the research firm, increased investment in AI models will increase the cost of AI networks by 34% over the next five years. This equates to spending $34 billion in 2028, up from Morningstar estimates of $8 billion in 2023.
Pointing to Marvel
Among the companies Morningstar cites, Marvell Technology is its top choice in the networking trend. Analysts believe the company is “attractively undervalued” at the moment and offers investors an immediate opportunity to benefit from increased investment in generative AI networks.
Of the analysts tracking Marvel there so far, no one has a sell recommendation, and the average price target is $88.92 — which corresponds to an upside of 21.21 percent.
Morningstar also mentions Arista Networks, Nvidia, and Broadcom, which will benefit from the bottleneck in networking solutions. However, analysts believe the opportunities in AI have already been largely priced into these companies' stock prices, as they have already posted a strong rally, CNBC reported.
“But patient investors can wait for a pullback, as the long-term fundamental opportunity is strong,” the analysts wrote.
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