When one flagship stock in an industry drops a piece of very good news, many peers get lifts simply by association. That was the impetus behind the notable share price advances of quite a few specialty tech stocks on the second-to-last trading day of the week.
Top cybersecurity companies landed in positive territory, with CrowdStrike Holdings(NASDAQ: CRWD) booking a more than 6% gain on the day and Palo Alto Networks(NASDAQ: PANW) rising by over 2% despite a Wednesday earnings release that really displeased the market. Cloud computing titles also did well, with Cloudflare(NYSE: NET) and Datadog(NASDAQ: DDOG) stocks both defying gravity by more than 4%.
The AI hardware king had a boffo fourth quarter
These rises came on the heels of the massive shot in the arm that was Nvidia's fourth-quarter and full-year 2024 results, released after market hours Wednesday. Not only did the company report ballooning revenue and profitability, but it also trounced analyst estimates for both headline numbers.
One of the most powerful motors behind Nvidia's growth was (and is) its data center unit. This segment is responsible for the company's next-generation hardware that enables artificial intelligence (AI) functionalities.
It's nearly inarguable to say that AI is the most compelling development in the tech industry at the moment. Every tech company worth its weight in microchips wants to develop and/or adopt some form of it. Meanwhile, clients across many sectors are hungry to boost their businesses by integrating AI into their operations.
So, it's hardly surprising that specialty techies wading into the AI pond and using it to build their own futures gained handsomely in the wake of Nvidia's triumph. CrowdStrike, Palo Alto Networks, Cloudflare, and Datadog are all busy at this moment harnessing AI and trying to devise new ways the tech can benefit them. There is a clear and sharp demand for AI functionalities, and each of the four companies is nicely placed to take advantage of this.
The future continues to look glaringly bright
I like all four of those stocks (similar to my feeling on Nvidia, come to think of it). None are exactly bargains just now, but AI's potential to enhance a business is breathtaking. I'd go so far as to say the potential of each of those companies to book top- and bottom-line gains on the technology alone is enormous.
Sooner or later, there will be a correction, as post-earnings highs tend to fade relatively quickly. But this current revolution has just begun, so we can certainly expect more gains in the future from any company effectively capitalizing on AI.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Cloudflare, CrowdStrike, Datadog, Nvidia, and Palo Alto Networks. The Motley Fool has a disclosure policy.
