AI Network Stocks: Poised for Growth in the Era of DeepSeek
Concerns over guidance and capital investments impacted the Magnificent Seven trade last week. However, industry experts believe the development of DeepSeek, an open-source large language model, will accelerate AI innovation and adoption.
Instead of hyperscalers and chipmakers, investors are advised to consider AI network stocks, which provide infrastructure for AI applications.
Demand for High-Speed Networking
DeepSeek and similar AI models significantly increase compute demand, driving the need for high-speed networking solutions. Bank of America analysts predict "wider AI adoption" and "robust" demand.
Beneficiaries
Top beneficiaries include:
* Ciena (CIEN): Increased demand from hyperscalers as AI-related data expands beyond data centers.
* Coherent (COHR): Expertise in transmitting higher data speeds and addressing complex data movement challenges.
* Celestica (CLS): Custom compute and servers for hyperscalers.
* Arista Networks (ANET): Strong prospects following the DeepSeek-driven sell-off. Overweight rating from Morgan Stanley analyst.
Analyst Outlook
* Tony Wang (T. Rowe Price): AI network stocks are "well positioned."
* Ruben Roy (Stifel): DeepSeek's R1 model will drive global demand for networking infrastructure.
* Meta Marshall (Morgan Stanley): Arista Networks is bullish with an Overweight rating.
Bottom Line
As AI adoption grows, AI network stocks are poised for significant growth. Investors should consider these companies for exposure to the next phase of AI innovation.