What Happened?
Shares of cloud security and performance company Cloudflare (NYSE:NET) jumped 10.1% in the morning session after TD Cowen reiterated a Buy rating and a $265 price target, pointing to healthy security demand and recent strategic moves.
The firm noted that Cloudflare's platform was expanding through several acquisitions. Specifically, Cloudflare acquired Human Native, an AI data marketplace, and the team behind the Astro web framework. These acquisitions were seen as strengthening the company's market position.
Additionally, Cloudflare recently expanded its partnership with JD Cloud to create a global platform for AI inference workloads, signaling a deeper push into the artificial intelligence sector. The combination of a positive analyst outlook and strategic growth initiatives appeared to fuel investor optimism.
Beyond security and standard inference, market sentiment further reflected the adoption of Cloudflare's infrastructure for agentic AI. Analysts continued to assess this as an expansion into high-growth AI middleware. However, the long-term financial impact remains contingent on broader enterprise adoption rates and the transition to fully autonomous AI workflows.
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What Is The Market Telling Us
Cloudflare’s shares are very volatile and have had 20 moves greater than 5% over the last year. But moves this big are rare even for Cloudflare and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 18 days ago when the stock dropped 6.1% as a broader market rotation out of the technology sector led to profit-taking following a recent rally.
The move was part of a wider trend that saw high-growth technology stocks fall, with the Nasdaq experiencing the sharpest decline among the major indices. Multiple reports indicated that traders were locking in profits, particularly from the artificial-intelligence trade, which had previously seen a strong run-up. This market action represented a shift in investor focus, as money moved out of tech. Defense stocks emerged as the primary beneficiary of this capital shift, surging after President Trump proposed a massive $1.5 trillion defense budget for 2027.
Major contractors rallied on the news, with Northrop Grumman jumping over 10% and Lockheed Martin gaining nearly 8%, providing a counterbalance to the tech slump that kept the S&P 500 flat. The rotation into heavy industry was further supported by a stabilization in energy markets, as crude prices rebounded.
Cloudflare is down 2.1% since the beginning of the year, and at $191.88 per share, it is trading 24.2% below its 52-week high of $253.30 from October 2025. Investors who bought $1,000 worth of Cloudflare’s shares 5 years ago would now be looking at an investment worth $2,491.
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