The AI revolution may only be in its early stages, as tech giants and start-ups invest mountains of money into AI infrastructure. Microsoft is poised to spend a staggering $80 billion on AI data centers this year, a strong sign that significant spending on AI will continue for the foreseeable future.
While it may be wise to bet on the big players in AI, there are some smaller companies worth considering. Cloud Flare (NET -2.66%) focuses on AI inference with its global network of AI-enabled servers, and Digital Ocean (DOCN -1.33%) is working to expand its developer-friendly cloud platform into the AI space. Although AI does not currently represent a significant portion of revenue for either company, that could change as the industry evolves.
Focus on AI inference
In the long term, Cloudflare expects that running AI models will be a much bigger opportunity than training AI models. Tech giants are equipping powerful data center GPUs to train ever more powerful AI models, but there are signs that current methods of training AI models are hitting a ceiling.
Improvements are becoming more and more iterative, and AI companies have started using AI-generated data for training because they are simply running out of real data.
Cloudflare has built its AI-focused products around the ability to run AI models close to users as quickly as possible. The company’s Workers platform allows developers to run code across Cloudflare’s global network, powering APIs or even entire web applications. Workers AI integrates with this platform and supports a wide range of AI models capable of performing text generation, image classification, translation, and other AI-based tasks.
In addition to allowing AI models to run on its network, Cloudflare offers an AI gateway to help developers manage AI models running elsewhere. AI Gateway provides analytics, logging, caching, retry, and rate-limiting capabilities when calling third-party AI providers, including Microsoft Azure, OpenAI, Mistral AI, Amazon Bedrock, and much more. Most features are completely free, making AI Gateway an effective gateway for AI developers to the Cloudflare platform.
AI is only a small part of Cloudflare’s business. The company is best known for its content delivery and security services, and its development platform includes Workers and various database and storage products. Cloudflare also offers Zero Trust security services, enabling businesses to effectively secure their infrastructure, applications and data in the era of cloud computing.
The scale of Cloudflare’s platform and the large number of free and paid users already using some of the company’s products could provide Cloudflare with a significant advantage as it seeks to sell customers to its AI product . Cloudflare has approximately 221,000 paying customers, and more than 3,200 customers spend at least $100,000 per year. If the AI industry moves toward AI inference as the enterprise expects, Cloudflare could be one of the big winners of the AI revolution.
Make it simple
DigitalOcean is a traditional cloud computing provider, offering virtual servers and a growing collection of higher value cloud services. The company’s main goal has always been simplicity. In an industry dominated by cloud giants with expansive platforms designed for enterprise customers with vast IT budgets, DigitalOcean appeals to individual developers and small businesses by eliminating much of the complexity.
DigitalOcean was a bit of a latecomer to the AI space, but the company is now developing its own AI capabilities. The acquisition of AI platform Paperspace in mid-2023 was the first step in the AI industry, and with a CEO who took over about a year ago and who aimed to accelerating the pace of innovation, the company is now moving full steam ahead. AI.
DigitalOcean now offers GPU-based virtual servers intended to run AI workloads as well as the ability to deploy popular AI models on these virtual servers without any configuration. The company also offers its new GenAI platform, currently in early availability, which aims to train, refine and deploy intelligent AI agents.
As enterprise customers flock to large cloud platforms for their AI needs, DigitalOcean seeks to provide a more accessible option for smaller businesses. DigitalOcean has already won more than 600,000 paying customers for its cloud computing services, including more than 150,000 who spend at least $50 per month on the platform. The company’s AI products can help it capture a greater share of cloud spending and make it a viable option for more customers as AI proliferates.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Timothy Green holds positions at DigitalOcean. The Motley Fool features and recommends Amazon, Cloudflare, DigitalOcean and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
