Nvidia is one of the most popular artificial intelligence actions (AI) on the market. The company played a pioneering role in the proliferation of AI technology by designing powerful graphics cards and servers systems that have enabled companies to train and deploy AI models.
The solid request for NVIDIA graphics cards has led to remarkable growth in the company’s income and profits in the past two years, which has also led to a big leap in the course of its shares.
However, the above graph also shows that Nvidia has lost momentum in recent months. More specifically, NVIDIA action is down 8% in the last three months when writing this article. This can be attributed to several factors. These include restrictions on sales of NVIDIA chips in foreign countries, the fear of a slowdown in IA spending and the recent Deepseek affirmation that he has developed a low -cost AI model, questioning the billions that are spent by technology giants on expensive equipment.
Now there is a good chance that Nvidia will be able to overcome these challenges and start hovering again. However, investors can consider other options to capitalize on the growing adoption of AI in order to diversify their portfolios. This is where Cien (Cien 1.97%)) comes in the image.
The supplier of optical networking equipment has recorded healthy gains of 15% in the last three months, surpassing Nvidia by substantial margin. More importantly, the stock has room to run higher. Let’s look at the reasons why.
Network demand fueled by AI will feed CIENA growth
The rapid networking speed requirement increased after the advent of the AI so that huge amounts of data are accessible and quickly moved to servers for processing purposes. Any slowdown in networking speeds could have a negative impact on the performance of AI models. Unsurprisingly, sales equipment sales to support AI -generating applications should increase at an annual rate of 34% to 2028.
Ciena began to benefit from this lucrative opportunity, testifying to strong growth in orders for its optical networking equipment which allows transmission of high -speed data. Cloud suppliers now represent four of the 10 best customers in the company. Management comments on the Conference Conference on the results of December 2024 indicate that cloud suppliers are likely to move the needle more importantly for the company thanks to the AI. According to the CEO Gary Smith: “With Cloud and IA, now the main engines of demand, we believe that the growth of the bandwidth will exceed these historical levels in the coming years. And to be clear, AI is not only a phenomenon of data center to monetize the center of massive compute investments;”
The request for networking fueled by AI explains why the orders reserved by CIENA during the previous quarter were higher than its quarterly income. The company originally expected that orders remain below its quarterly income. However, significant investments made by cloud service providers to build AI infrastructure gave CIENA a boost.
Investors have already seen at what speed the request for networking equipment linked to AI should develop over the next three years. This explains why Ciena is expecting its addressable market to increase $ 12 billion up to $ 2028 to $ 26 billion. In addition, the company was classified as the best supplier of the optical networking equipment in North America by several third -party research companies, which means that it is in a solid position to take advantage of the lucrative opportunity of the final market.
Solid financial growth is expected to pave the way to a greater increase in stock
CIENA’s management expects company revenues to increase at an annual rate of 8% to 11% over the next three years, as well as an adjusted operating margin from 15% to 16% during the year 2027. For comparison, the non -GAAP operating margin (adjusted) of CIENA (adjusted) at 9.7% in the year 2024.
The solid growth of the company’s income and margins should pave the way for formidable growth in the company’s results over the next three years. This is precisely what consensual estimates suggest.
Cien EPS estimates for the current exercise data by Ycharts
The above graph clearly indicates that Ciena’s benefits should grow at a fairly healthy pace compared to the levels of $ 1.82 per share of the 2024 financial year (Ciena’s exercise ends in November). If the company provides $ 4.17 per share in profit after three years and is negotiated the profit at that time, in accordance with technology technologies Nasdaq-100 The benefit of the multiple index, its scholarship course could increase to $ 142 in three years.
This represents a jump of 77% compared to the current levels, which suggests that this stock of technology is still worth buying even after the earnings that it has timed in recent months.
Harsh Chauhan has no position in the actions mentioned. The Motley Fool has positions and recommends Nvidia. The Motley Fool has a policy of disclosure.
