The vortex of innovation and expansion spurred by artificial intelligence (AI) across various sectors has ignited significant growth in the demand for advanced data center infrastructure. As AI models burgeon in complexity, and demand surges exponentially, data centers stand as the bedrock for powering computation and storage needs. Investors aiming to capitalize on the burgeoning AI frenzy should carefully consider the top data center stocks to fortify their portfolios.
Dell Technologies (DELL)
Emerging as a formidable contender in the data center domain, Dell Technologies (NYSE:DELL) boasts a comprehensive suite of servers, storage solutions, and networking products that underpin enterprises in constructing AI-driven infrastructure.
Dell’s PowerEdge servers deliver robust performance and scalability, making them well-suited to handle even the most strenuous AI workloads. Moreover, the company’s networking solutions ensure seamless data transmission within the data center, a critical element in optimizing the smooth and efficient operation of AI applications. Dell’s strategic emphasis on edge computing further bolsters its competitive edge in the data center arena.
Wall Street sentiment is particularly bullish following the company’s robust performance in FY23. Despite a 14% year-over-year (YOY) decline in top-line growth, net earnings surged by 32% YOY to $3.2 billion. These recent milestones perfectly align Dell to capitalize on the AI landscape, solidifying its position as one of the top data center stocks for investors seeking to maximize gains.
Arista Networks (ANET)
Arista Networks (NYSE:ANET) looms as a powerhouse in high-performance networking solutions. Specializing in data center switches and routers, the company delivers lightning-fast speeds, minimal latency, and unparalleled scalability.
Arista Networks’ technology and infrastructure play a critical role in the development and deployment of cutting-edge AI applications. The synergy between its CloudVision platform and EOS cloud operating system is indispensable in supporting AI workloads that often entail processing vast datasets. Technology giants such as Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN), and Google (NASDAQ:GOOG, NASDAQ:GOOGL) heavily rely on Arista’s networks for their internal infrastructure.
In the fiscal year 2023, Arista achieved record revenue, earnings, and free cash flow from operations, underscoring sustained robust demand for its products. Operating margins have notably expanded over the past decade. As the complexity of AI workloads continues to surge, presenting challenges in network connectivity, ANET stock stands primed to address these bottlenecks effectively.
Synopsys (SNPS)
Although not as renowned as its counterparts, Synopsys (NASDAQ:SNPS) assumes a pivotal role in the data center landscape. The company furnishes software tools crucial in designing chips utilized in data center servers, networking gear, and other fundamental hardware components.
The ascendance of AI has propelled Synopsys forward, as the demand for more sophisticated AI chips intensifies to meet burgeoning AI workloads. Synopsys’ tools play a pivotal role in enabling innovation in performance and power efficiency. By collaborating directly with chip designers, Synopsys facilitates the unlocking of enhanced computing power’s full potential.
In the fiscal year 2023, Synopsys reported record revenue of $5.84 billion, up 15% YOY, whereas earnings per share surged by 26% YOY to $7.92. The company also exhibited robust cash flow from operations. Growth momentum remains robust, with revenue climbing by 25% in Q1 FY24 and earnings per share aligning with the upper end of guidance. As prominent semiconductor firms continue to rely on Synopsys’ robust semiconductor IP portfolio, Synopsys emerges as a premier data center stock to consider adding to one’s investment portfolio in 2024.
On the date of publication, the views expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Terel Miles is a contributing writer at InvestorPlace.com, with more than seven years of experience investing in the financial markets.
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