Jeff Kilburg, founder of KKM Financial and CNBC contributor, has selected Fortinet, Cloudflare, and Arista as his key tech picks for the fourth quarter. He views these assets as a strategic way to capitalize on corporate spending in artificial intelligence without investing directly in major hyperscalers.
Arista, a provider of data center networking equipment, has seen its stock rise by approximately 58% this year. Kilburg highlights the company's operating margins, which are currently near 50%. He maintains that hyperscalers will continue to prioritize investments in networking infrastructure.
Fortinet, a cybersecurity firm, has experienced a 130% increase in its stock price throughout the year. The company is currently trading at roughly 53 times its projected earnings. Kilburg notes that adding Fortinet to his portfolio provides diversification alongside his existing holdings in CrowdStrike and Palo Alto Networks.
Cloudflare is currently trading above its analyst price target of $350, with a forward price-to-earnings ratio estimated near 300, though some projections place it at 246. Despite the high valuation and the fact that the company is not yet profitable, Kilburg remains committed to the position.
The investment strategy relies on sustained growth in AI budgets. FactSet data indicates that S&P 500 earnings are projected to rise by about 29% in the third quarter. This growth is measured against a 10-year average of 8% and occurs alongside 10-year yields reaching their highest levels since 2002.
