AI's market momentum is just getting started — and its benefits are set to trickle down

Seana Smith
·Host
2 min read
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AI’s unprecedented disruption is just getting started — and so is its investment opportunity.

Those were the dominant themes at the Barclays Global Technology conference last week in San Francisco. The summit brought together CEOs of software and cybersecurity firms, along with venture capitalists and top industry analysts.

Unwavering excitement surrounding artificial intelligence has pushed the "Magnificent Seven"— Apple (AAPL), Alphabet (GOOGL, GOOG), Microsoft (MSFT), Amazon (AMZN), Meta (META), Nvidia (NVDA), and Tesla (TSLA) — to sweltering valuations. Next year, the AI craze will likely expand beyond mega-cap names, trickling down to smaller tech plays.

“The AI momentum will carry into 2024 and beyond,” Kristin Roth DeClark, Barclays global head of technology investment banking, told me at the event. “It's a massive movement happening in technology that we haven't seen since the internet.”

While Nvidia’s GPUs were all the rage this year, other hardware makers are set to benefit from the growth of cloud computing.

“Arista Networks (ANET) is the leading AI play. They make switches and routers — the networking element of these data centers — and normally that's 10% or so of the spend in AI data centers,” said Barclays senior tech analyst Tim Long.

Juniper Networks (JNPR) — which also makes networking gear — has started to see the benefits of AI, as it integrates features like virtual assistants and advanced insights to help corporations more easily manage its IT network.

“Our AI-driven enterprise business has been performing phenomenally well,” said Juniper CEO Rami Rahim. “This is proof that AI is not just in its hype cycle, it's proof that AI is actually delivering real results for our end customers.”

Watch out for opportunities in cybersecurity as well. Generative AI poses a risk of increasingly sophisticated attacks, but also a chance for companies to advance their own technologies. Cato Networks, for example, is using AI to improve its threat detection, per CEO Shlomo Kramer.

A key for software companies in 2024 will be to incorporate AI features into product offerings, a move that will expand value for customers. Developer platform GitLab (GTLB) has added a suite of 14 AI capabilities, including a feature that provides suggestions to help analyze code. The company reported a 32% rise in revenue in its Q3 earnings.

“AI is revolutionizing the software development world,” GitLab CEO Sid Sijbrandij told me. “It is a tailwind and it makes our software way more useful.”

While the mega-cap companies raced to build and train AI models in 2023, the theme for 2024 will be how businesses across the spectrum are monetizing new AI features.

“Before, everybody was looking for growth, but now people are looking for real, profitable businesses," said Lux Capital managing partner Bilal Zuberi. "It’s becoming more metrics and operations driven.”

Seana Smith is an anchor at Yahoo Finance. Follow Smith on Twitter @SeanaNSmith. Tips on deals, mergers, activist situations, or anything else? Email seanasmith@yahooinc.com.

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