Fears that AI could become dangerous, or even threaten humanity, got more attention recently. What’s interesting is that Anthropic and OpenAI seemed to give credence to folks’ fears that AI will take over the world.
Anthropic’s CEO, Dario Amodei, wrote an essay in response, titled “We Must Pace the Frontier,” calling for a slowdown in the creation of highly advanced models in order to provide more time for testing and safety measures. OpenAI’s Sam Altman echoed the urgency.
Some AI researchers piled on with some truly scary projections of their own while NVIDIA Corporation (NVDA) CEO Jensen Huang pushed back. He noted safety remains important, but he doesn’t expect self-improving AI to take over the world.
I agree with Huang. Fears about AI taking over the world are overblown, and I don’t foresee AI development slowing anytime soon. Order backlogs are simply too massive, and they are projected to persist through 2032. In other words, the AI Revolution isn’t tapping the brakes any time soon.
Here are two AI and data center companies that recently woke up and are getting investors’ attention.
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Ciena is building the backbone of the AI boom
Ciena Corporation (CIEN) builds the highways on which data travels. As AI drives explosive growth in data traffic, copper wires can’t keep up, so Ciena moves that data on light instead, helping its customers keep pace with the AI economy.
During an investor forum on September 16, the company provided an update on its three-year outlook. The company remains confident and sees plenty of opportunities ahead. As a result, Ciena expects revenue to grow at about a 30% compound annual growth rate through 2029. Operating margins are forecast to be between 32% and 35%.
Thanks to increased customer demand, more supply, and new market opportunities, Ciena remains positioned to “deliver sustained revenue growth, significant profitability expansion, and attractive returns.” CIEN remains a Top Stock in our portfolio, rated A by my grading system, and an Aggressive buy below $465.
Coherent could power the next phase of AI
Coherent, Inc. (COHR) develops laser systems and components, high-speed transceivers, and optical switching gear. All of it is critical to the operations of data centers, AI networks and global communications. The transceivers are particularly important as they’re responsible for moving data between servers in data centers.
Unfortunately, unscrupulous short sellers targeted the stock this summer, claiming that Coherent faced stiff competition from Chinese manufacturers. However, the stock has since bounced.
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Coherent is positioning its optical technology for both today’s AI data centers and the potential data centers of the future. There is a perception that if and when data centers go to space, Coherent is going to be very important because the data is going to be transmitted back to Earth via lasers. Meanwhile, the company recently launched its PhotonLink platform and expanded its Pluggable Optical Line Systems (POLS), which use advanced laser technology to help eliminate bandwidth bottlenecks in land-based AI data centers.
Given the recent rally, shares are trading above my current buy limit. Only buy this Conservative stock on dips below $299.
My stock grading system rates Coherent as a B.
For more information about my stock grading system, click here.
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