You probably don't think of Verizon Communications(NYSE: VZ) as an artificial intelligence (AI) stock. After all, it's a boring old telecommunications giant, far removed from the exciting world of AI research.
Well, that might change soon.
On last week's earnings call, Verizon CEO Hans Vestberg painted a picture of how generative AI services could make game-changing contributions to his company's revenues.
Vestberg's vision for Verizon's AI-driven revenues
Vestberg started the third-quarter call with a spoiler alert.
"With our storage, with our power, and the mobile edge compute, we see great opportunities when it comes to AI and revenues for us," he said.
AI isn't a big part of Verizon's business so far. The company uses AI systems to manage its call centers and help in-store customers get the help they need from Verizon's staff, but that's about it. That being said, cloud-based generative AI systems are raising demand for high-speed internet connections, and Verizon has a ton of unused fiber-optic capacity available.
Vestberg noted that it will take some time to monetize the AI opportunity. In particular, he expects large companies to build and use their own large language models (LLMs) and generative AI tools over time. Companies will want bespoke AI systems to ensure data security and proper privacy protections, which will lead to a plethora of enterprise-owned LLMs powered by edge computing hardware.
"It's going to take some time from all these large language models to be real products and sitting in the edge of the network," Vestberg said. But they're already moving in that direction.
The role of Verizon's dark fiber
Verizon Business CEO Kyle Malady expanded on Vestberg's AI comments. In the U.S. alone, the telecom has more than 1 million route miles of "dark fiber" -- unlit fiber-optic cable that's not being used by the network, and that can be leased to other private companies for their own data-transmission needs. Some of its formerly excess network capacity has been assigned to supporting Verizon's 5G wireless networks, but there's plenty of unused and underused fiber in the ground.
"We're kind of reimagining those assets right now," Malady said. "We're getting a lot of good orders from hyperscalers, either on dark fiber or lit and we're going to see that growing. But we have more than that. Not just the fiber -- it's the power, space, and cooling, which you know is in really high demand."
In other words, Verizon is bundling its high-speed fiber-optic network access with edge-computing support in its nationwide grid of telecom-grade data centers. The market opportunity here is so huge, Verizon isn't even trying to capture the whole thing.
"We can't cover it all, but there are certain segments we might be better off in than others," Malady said. "We'll be back to you pretty soon talking to you about it. It's a great opportunity for us."
Yep, Verizon is a serious AI stock
The fiber-optic networking angle should translate into significant revenue growth for Verizon over the next few years as the generative AI market moves into the next phase of technology upgrades. Cloud computing is a great solution for many business issues. When you run the back-end computing to support those services in a data center that is physically closer to the actual end users, you unlock higher performance and stronger security. That's the power of edge computing.
And again, the opportunity is too large for any single provider to handle. Vestberg's and Malady's words should be music to the ears of shareholders of Crown Castle(NYSE: CCI), Lumen Technologies(NYSE: LUMN), and AT&T(NYSE: T), too. These companies also own massive data centers and fiber networks with copious amounts of unused capacity, setting them up to share in the big enterprise AI wins that Verizon's management envisions.
On top of the upcoming surge in fiber capacity demand, Verizon should also see lots of handset upgrades as mobile devices shoulder a larger part of the AI workload. All things considered, Verizon is becoming a pretty obvious AI investment these days. The company is playing an active part in the enormous AI boom.
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Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Crown Castle. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.
