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Citi Upgrades Cloudflare (NET) to Buy, Citing AI Growth Potential and $5B Revenue Target by 2028

We recently compiled a list of the 10 AI News You Probably Missed. In this article, we are going to take a look at where Cloudflare, Inc. (NYSE:NET) stands against the other AI stocks.

AI Boosts Data Center Market to New Heights

According to Synergy Research Group, data center M&A activity set a new record in 2024, with deals totaling $57 billion, compared to the previous high of $52 billion in 2022. While 2023 saw a sharp decline to $26 billion, the rebound in 2024 included two major equity investments in Vantage Data Centers worth $9.2 billion combined. Moreover, equity investments in data center solutions providers, EdgeConneX and DataBank contributed to the rise. Private equity played a dominant role, accounting for 80-90% of deal values since 2021. With $29 billion in pending deals and a $15 billion future pipeline, the trend is expected to continue in 2025, fueled by increasing demand for cloud services, digital platforms, and generative AI.

Moreover, the firm believes that global spending on data center hardware and software in 2024 probably rose by 34%, reaching a record $282 billion. Public cloud infrastructure spending, up 48%, now makes up 55% of the market, due to the increasing demand for GPUs to support generative AI workloads. Enterprise spending also saw a significant 21% increase after years of marginal growth. According to Synergy, public cloud spending is expected to grow further and could reach 65% of the market within five years.

READ ALSO: 10 AI Stocks Making Waves on Wall Street and Top 10 AI Stocks on Wall Street’s Radar.

U.S. Boosts AI Infrastructure with New Executive Order

As the global AI infrastructure landscape is rapidly evolving, the U.S. is positioning itself at the forefront. On January 14, former President Joe Biden signed an executive order to boost U.S. leadership in artificial intelligence by fast-tracking the development of domestic AI infrastructure. The order directed the Department of Defense and Department of Energy to lease federal sites for gigawatt-scale AI data centers powered by clean energy, with developers covering all costs.

Requirements include using U.S.-manufactured semiconductors, adhering to labor standards, and ensuring AI safety and national security. Agencies will streamline permits, upgrade energy transmission, and support global AI infrastructure expansion while promoting clean energy technologies.

For this article, we selected AI stocks by reviewing news articles, stock analysis, and press releases. We listed the stocks in ascending order of their hedge fund sentiment taken from Insider Monkey’s database of 900 hedge funds.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

A close-up of a server array powering a cloud-services system.

Cloudflare, Inc. (NYSE:NET)

Number of Hedge Fund Holders: 44

Cloudflare, Inc. (NYSE:NET) offers cloud solutions that incorporate AI to improve security, performance, and zero-trust services across multiple platforms, such as IoT and SaaS applications.

Citi analyst Fatima Boolani upgraded Cloudflare (NYSE:NET) to Buy from Neutral and raised its price target to $145 from $95, due to confidence in its role in AI development, especially as AI training shifts to inferencing. The analyst highlighted opportunities through its Apple partnership, improved sales productivity following 2023 changes, and strong leadership additions. While the stock carries a high valuation, Citi believes Cloudflare can sustain 27-30% revenue growth and achieve $5 billion in revenue by 2028, with profitability supported by expanding free cash flow margins.

Overall NET ranks 4th on our list of the AI stocks that investors probably missed. While we acknowledge the potential of NET as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NET but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap

Disclosure: None. This article is originally published at Insider Monkey.

The $250 Trillion AI Hype is Real. A few years from now, you’ll probably wish you’d bought this stock.

When Jeff Bezos said that one breakthrough technology would shape Amazon’s destiny, even Wall Street’s biggest analysts were caught off guard.

Fast forward a year and Amazon’s new CEO Andy Jassy described generative AI as a “once-in-a-lifetime” technology that is already being used across Amazon to reinvent customer experiences.

At the 8th Future Investment Initiative conference, Elon Musk predicted that by 2040 there would be at least 10 billion humanoid robots, with each priced between $20,000 and $25,000.

Do the math. According to Musk, this technology could be worth $250 trillion by 2040.

Put another way, that’s roughly equal to:

  • 175 Teslas
  • 107 Amazons
  • 140 Metas
  • 84 Googles
  • 65 Microsofts
  • And 55 Nvidias

And here’s the wild part — this $250 trillion wave isn’t tied to one company, but to an entire ecosystem of AI innovators set to reshape the global economy.

It’s a leap so massive, it could reshape how businesses, governments, and consumers operate worldwide.

Even if that $250 trillion figure sounds ambitious, major firms like PwC and McKinsey still see AI unlocking multi-trillion-dollar potential.

How could anything be worth that much?

The answer lies in a breakthrough so powerful it’s redefining how humanity works, learns, and creates.

And this breakthrough has already set off a frenzy among hedge funds and Wall Street’s top investors.

What most investors don’t realize is that one under-owned company holds the key to this $250 trillion revolution.

In fact, Verge argues this company’s supercheap AI technology should concern rivals.

Before I reveal the details, let’s talk about how some of the richest people on the planet are positioning themselves.

  • Bill Gates sees artificial intelligence as the “biggest technological advance in my lifetime,” more transformative than the internet or personal computer, capable of improving healthcare, education, and addressing climate change.
  • Larry Ellison — through Oracle, is spending billions on Nvidia chips and partnering with Cohere to embed generative AI across Oracle’s cloud and apps.
  • Warren Buffett — not known for tech hype — says this breakthrough could have a ‘hugely beneficial social impact.

When billionaires from Silicon Valley to Wall Street line up behind the same idea — you know it’s worth paying attention to.

Even as we admire what Tesla, Nvidia, Alphabet, and Microsoft have built, we believe an even greater opportunity lies elsewhere…

But the real story isn’t Nvidia — it’s a much smaller company quietly improving the critical technology that makes this entire revolution possible.

And judging by what I’m hearing from both Silicon Valley insiders and Wall Street veterans…

This prediction might not be bold at all:

A few years from now, you’ll wish you’d owned this stock.

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