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AI stocks soared last week after OpenAI announced a partnership with Oracle (ORCL) and SoftBank that could result in up to half a trillion dollars of investment in AI infrastructure over the next four years.
The investment announced Tuesday adds to the enormous sums that tech giants have already said they’ll spend on data centers and other AI infrastructure in the coming years. Microsoft (MSFT) President Brad Smith said earlier this month that the company was “on track to invest approximately $80 billion to build out AI-enabled datacenters” in the fiscal year ending in June. Competitors Alphabet (GOOG)(GOOGL), Amazon (AMZN), and Meta Platforms (META) have forecast making investments on a similar scale.
That spending has fueled a huge rally in the stocks of companies that supply the metaphorical "picks and shovels" of artificial intelligence: the makers of semiconductors, servers, and networking equipment, as well as power generators.
Below, we look at the weekly performance of Wall Street's favorite AI plays and dive deeper into some of the week's top AI stocks.
Ciena
Shares of Ciena Corp. (CIEN), which sells networking hardware, software, and services to telecommunications and cloud-computing customers, soared 14% last week. Ciena is expected to benefit from the widespread adoption of artificial intelligence applications, which should increase demand for its optical networking technology.
"As Cloud and AI drive bandwidth demand across the network, we are positioned for accelerated revenue growth and market share expansion moving forward,” said CEO Gary Smith in the company’s most recent earnings report.
Bank of America analyst Tal Liani earlier this month predicted Ciena would be a key GenAI beneficiary this year. The company, he estimated, commands nearly 30% optical market share (excluding China) and nearly 50% of the 800G optical market. Liani expects 800G modules, which provide the greatest bandwidth of any available optical modules, “to become more pronounced in 2025 and beyond to support GenAI throughputs and low latency requirements.”
Liani is one of eight Wall Street analysts tracked by Visible Alpha who rate Ciena stock a “buy.” One analyst has assigned it a “Hold” rating. The average price target of $91.56 is 5% below Friday’s closing price.
Arista Networks (ANET), a competitor of Ciena in the networking space, also surged last week, rising 7.7%.
Monolithic Power Systems
Shares of Monolithic Power Systems (MPWR) jumped 8.4% last week.
The company, which designs and sells power-management semiconductors for an array of markets, has seen its data center sales balloon with growing AI demand. In the third quarter of 2024, Monolithic reported an 86% increase in AI and cloud-computing revenue. That business accounted for roughly 30% of total sales, up from 21% in the third quarter of 2023 and just 10% in 2021.