The artificial intelligence era is proving to be quite lucrative for big data companies. In addition to providers of data storage services, firms that specialize in analyzing huge amounts of unstructured data are getting a big boost from the proliferation of AI.
Moreover, large language models, which enable AI apps to be built and assist AI systems with understanding human writing and speech, require large amounts of data to be created. Consequently, firms with large amounts of such data have an important competitive advantage.
As data centers expand and many new ones are built, firms that sell products to these data centers, along with the operators themselves, should grow very rapidly. I would put all the types of firms I’ve described in the “big data” category. Here are three large AI data stocks to buy.
Pure Storage (PSTG)
The proliferation of generative AI caused the demand for flash storage products that can quickly retrieve data, Seeking Alpha analyst Star Investments recently explained. Because Pure Storage (NYSE:PSTG) only sells such products, it should get a big boost from the proliferation of generative AI. Also likely to accelerate the adoption of flash storage is that it’s significantly cheaper than more prevalent hard disk drives (HDDs), and uses less power and space than HDDs.
Pure Storage already appears to benefit significantly from the rapidly growing demand for its flash storage offerings. The company’s top line climbed a hefty 17% in the first quarter versus the same period a year earlier. Even more impressively, the firm’s remaining performance obligations, or backlog, jumped 27% year-over-year to $2.3 billion
Last month, Morgan Stanley downgraded the PSTG stock to “equal weight,” citing valuation, while Swiss bank UBS recently cut its rating on the shares to “sell,” based on its fears of increased competition.
But flash storage’s advantages over HDD, along with the continued proliferation of AI, should enable Pure Storage, as one of the system’s leading marketers, to continue to post very impressive results going forward. As a result, I view Pure Storage as one of the best large AI data stocks to buy.
Arista Networks (ANET)
One of the leading sellers of data center equipment, Arista Networks’ (NASDAQ:ANET) price target was raised to $385 from $330 by Citi on June 27. The company, a leader in the Ethernet switches market, is poised to benefit from increased utilization of Ethernet for use in AI systems, Citi forecast.
Another potential catalyst for ANET stock is the possible growth of the AI back-end switching market total addressable market. Citi says the market is expected to grow from $10 billion to $15 billion by 2027. Citi kept a “buy” rating on the shares.
As I noted in a column last month, Arista’s new software, which will enable data centers to manage their equipment more efficiently, could prove to be a positive game-changer for the firm. The proliferation of AI PCs should boost the demand for the company’s products for edge data centers.
On average, analysts expect the company’s earnings per share to climb to $9.08 in 2025, compared to $7.96 this year and the $6.94 EPs it delivered in 2023.
Oracle (ORCL)
Oracle (NASDAQ:ORCL) sells database software and cloud infrastructure products. Last month, the firm disclosed that OpenAI, which owns ChatGPT, would utilize Oracle’s cloud infrastructure offering. Moreover, Oracle made several of the largest deals in its history this year, with the transactions involving training large language models in the Oracle Cloud.
Investment bank Piper Sandler recently issued a favorable note on Oracle stock. The bank expects the company to benefit from the acceleration of spending on infrastructure-as-a-service related to AI and identified ORCL stock as one of its top ideas.
Given Oracle’s high leverage to the expansion of AI and Big Data, the firm should grow rapidly going forward. Indeed, the company predicts that its revenue will increase by at least 10% in its current fiscal year, which ends in May.
Given Oracle’s strong outlook, I believe that it is one of the best large AI data stocks to buy at this point.
On the date of publication, Larry Ramer held a long position in ANET. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
