Jim Tierney from AllianceBernstein suggests that the first phase of the AI trade involved chipmakers like Nvidia, while the next phase will shift towards cloud computing and software companies utilizing these AI chips, beginning in earnest by 2025. Despite often being overlooked due to less media attention than the "Magnificent Seven" tech giants, Cloudflare stands out as a potential beneficiary of this trend. Morgan Stanley analysts Hamza Fodderwala and Keith Weiss have raised Cloudflare's bull-case target price, forecasting a 55% rise by 2025. Cloudflare, a cloud computing company that accelerates and secures IT infrastructure, is rated the fourth-best cloud platform behind Amazon, Microsoft, and Google. Its advantages in speed and scale contribute to its leadership in content delivery and edge development platform markets, making it a preferred choice for AI companies. Cloudflare's extensive network covers 20% of all internet traffic, providing insights into performance and security that enhance its position in cybersecurity. The company anticipates its addressable market across application, network, and security services to grow from $176 billion in 2024 to $222 billion by 2027.

Cloudflare also supports 80% of the top 50 generative AI products, underscoring its appeal among AI startups. Furthermore, its potential partnership with Apple could boost revenues if Apple Intelligence becomes significant. Cloudflare's financial health is strong, with a 28% revenue increase in the recent quarter. However, Wall Street projections suggest Cloudflare’s adjusted earnings will grow at 36% annually through 2027, making its current valuation appear high. While investors might consider buying now, waiting for a price drop could be more prudent.