A Must-Buy AI Stock Down 71%: An Unmissable Opportunity in 2024
In 2023, AI stock were a goldmine for investors, with industry giants like Nvidia, Microsoft, and Amazon leading the charge. Their AI revenues primarily stemmed from cloud and data center services, crucial for developing and deploying cutting-edge AI solutions.
Yet, one AI-centric stock initially slipped under the radar. Entering the AI arena later in 2023, DigitalOcean (DOCN -2.03%) is now poised for substantial growth. Currently, its shares are 71% below their peak during 2021’s tech surge, when the stock’s value skyrocketed.
Here’s why DigitalOcean’s foray into AI could be a golden ticket for investors.
DigitalOcean: Catering to the Needs of Smaller Businesses in the Cloud
Cloud services range from basic data storage to sophisticated AI applications. This involves cloud providers equipping their data centers with high-performance chips, like those from Nvidia, to handle the immense data required for large language models, a cornerstone of AI.
DigitalOcean stands out by focusing on small to mid-sized businesses (SMBs), supporting companies from startups to those with up to 500 employees. Valued at just $3.1 billion, it’s a small fish in a big pond, contending with behemoths like Amazon Web Services and Microsoft Azure.
What sets DigitalOcean apart is its SMB-centric approach. It offers affordable, transparent pricing, personalized service, and a wealth of educational resources, making cloud technology more accessible for smaller businesses. In contrast, the industry giants primarily cater to larger enterprises.
AI development is complex and costly. For instance, a single Nvidia H100 GPU chip can cost $40,000, and large-scale operations may require thousands. Thus, many businesses turn to cloud providers for infrastructure needs.
DigitalOcean aims to democratize AI access for small businesses, a vision bolstered by its $111 million acquisition of Paperspace in July.
Paperspace: Democratizing AI for SMBs
DigitalOcean’s survey revealed that 43% of developers and SMBs are using AI and machine learning, with 78% planning to increase their usage. With the cost of AI model training projected to decrease significantly, as per Ark Investment Management, we’re likely to see a surge in AI adoption.
Ark estimates a staggering $41 trillion investment in AI by 2030, potentially adding $200 trillion to the global economy. This presents an unprecedented opportunity for cloud providers.
Paperspace, with over half a million customers, provides affordable AI solutions, including access to Nvidia’s H100 GPUs. Its competitive pricing model and specialization allow it to offer lower costs compared to larger cloud providers.
Investing in AI Stock DigitalOcean Now
DigitalOcean’s strategy focuses on nurturing start-up phase customers, offering competitive pricing with the hope of scaling up revenue as these businesses grow. The acquisition of Paperspace aligns perfectly with this philosophy.
With its 2023 financial results anticipated in February, Wall Street projects a 20% revenue increase to $690 million, slightly slower than its 34% growth in 2022.
This analysis suggests DigitalOcean’s stock, at its current undervalued position, represents a unique investment opportunity, especially considering its strategic moves in the AI domain.
