Why Are Cloudflare (NET) Shares Soaring Today
Shares of internet security and content delivery network Cloudflare (NYSE:NET) jumped 5.88% in the morning session after the company launched Workers AI, a platform that enables developers to run AI models while leveraging the company's global server network. Cloudflare intends to make it convenient to build AI solutions on its platform by partnering with other tech platforms. It partnered with Meta to make the Llama 2 open-source large language model (LLM) available to developers building AI apps on Cloudflare's platform. LLMs are powerful tools that can be used to develop a wide range of AI applications, from chatbots to translation tools. By offering Llama 2 on its platform, Cloudflare is making it easier for developers to build AI applications without having to worry about the cost and complexity of training and deploying their own LLMs.
In addition to the partnership with Meta, Cloudflare announced that it is deploying NVIDIA GPUs at the edge of its network. This will give Cloudflare customers access to the computing power they need to run AI applications at scale.
Overall, these announcements are very positive for Cloudflare. The partnership with Meta and the deployment of NVIDIA GPUs at the edge of its network will make Cloudflare a more attractive platform for developers looking to build AI applications.
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What is the market telling us:
Cloudflare's shares are very volatile and over the last year have had 58 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was five months ago, when the stock dropped 21.9% on the news that the company reported first-quarter revenue that narrowly missed analysts' forecasts, but its earnings per share and free cash flow came in above expectations. In addition, sales guidance for the next quarter fell short of the consensus estimates, and the full-year guidance was lowered, with management citing a weaker macro environment and longer sales cycles where potential customers may be scrutinizing their spend more.
Cloudflare is up 39.1% since the beginning of the year, but at $59.84 per share it is still trading 17.9% below its 52-week high of $72.93 from July 2023. Investors who bought $1,000 worth of Cloudflare's shares at the IPO in September 2019 would now be looking at an investment worth $3,320.
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