The AI revolution may still be in its early innings as tech giants and startups invest mountains of cash into AI infrastructure. Microsoft is reportedly set to spend an incredible $80 billion on AI datacenters this year, a strong sign that heavy spending on AI is going to continue for the foreseeable future.
While betting on the big AI players might make sense, there are some smaller companies that are worth considering. Cloudflare (NET 1.79%) is focused on AI inference with its global network of AI-capable servers, and DigitalOcean (DOCN -1.29%) is working to extend its developer-friendly cloud platform into the AI space. While AI isn’t a huge part of either company’s revenue right now, that could change as the industry matures.
Betting on AI inference
In the long run, Cloudflare expects the business of running AI models to be a much larger opportunity than training AI models. Tech giants are scooping up powerful data center GPUs to train ever more powerful AI models, but there are some indications that current methods of training AI models are running into a ceiling. Improvements are becoming more iterative, and AI companies have started using AI-generated data for training because they’ve simply run 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 enables developers to run code across Cloudflare’s global network, powering APIs or even entire web applications. Workers AI hooks into that platform and supports a wide range of AI models that can perform text generation, image classification, translation, and other AI-powered tasks.
Beyond enabling AI models to run on its own network, Cloudflare offers its AI Gateway to help developers manage AI models running elsewhere. AI Gateway provides analytics, logging, caching, retry functionality, and rate limiting when making calls to third-party AI providers including Microsoft Azure, OpenAI, Mistral AI, Amazon Bedrock, and many more. Most of the features are entirely free, making AI Gateway an effective onramp for AI developers onto Cloudflare’s 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 developer platform includes Workers and various database and storage products. Cloudflare also offers Zero Trust security services, enabling companies to effectively secure infrastructure, applications, and data in the age of cloud computing.
The breadth of Cloudflare’s platform and the enormous number of free and paying users already using some of the company’s products could provide Cloudflare an important advantage as it looks to win over customers for its AI product. Cloudflare has around 221,000 paying customers, and more than 3,200 customers spend at least $100,000 annually. If the AI industry does shift toward AI inference like the company expects, Cloudflare could be one of the big winners to emerge from the AI revolution.
Keeping it simple
DigitalOcean is a traditional cloud computing provider, offering virtual servers and a growing collection of higher-value cloud services. The company’s core focus has always been simplicity. In an industry dominated by cloud giants with expansive platforms tailored for enterprise clients with vast IT budgets, DigitalOcean appeals to individual developers and small businesses by cutting out much of the complexity.
DigitalOcean was a bit late the the AI party, but the company is now building out its own AI capabilities. The acquisition of AI platform Paperspace in mid-2023 was a first step into the AI industry, and with a CEO who took over about a year ago aiming to ramp up the pace of innovation, the company is now full steam ahead on AI.
DigitalOcean now offers GPU-backed virtual servers meant to run AI workloads as well as the ability to deploy popular AI models onto those virtual servers without any configuration. The company also offers its new GenAI platform, currently in early availability, which is aimed at training, fine-tuning, and deploying intelligent AI agents.
While enterprise customers are flocking to the big cloud platforms for their AI needs, DigitalOcean is looking to offer a more accessible option for smaller companies. DigitalOcean has already won over more than 600,000 paying customers for its cloud computing services, including more than 150,000 that spend at least $50 monthly 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.
