After eight consecutive days of decline, Pure Storage (PSTG, Financial) is experiencing a rebound with a 2% increase following the announcement of its expanded AI portfolio. The company introduced the Pure Storage GenAI Pod, a comprehensive AI stack designed to simplify AI deployment. This offering targets the microservices space, allowing companies to scale by transforming large code bases into smaller, service-specific applications. Major companies like Amazon and Netflix extensively use microservices across various industries.

What does Pure Storage do?

• Pure Storage specializes in flash data storage, which it believes will eventually replace traditional disk drives due to AI's power and performance needs. CEO Charles Giancarlo predicted last year that disk-based systems would lose prominence in about five years. This is significant given that 90% of hyperscalers like Google and Amazon currently use hard disks. Disrupting this market could be highly profitable for Pure Storage.
• While enterprises rely on flash for high-performance environments, they continue to use hard drives for other needs primarily due to cost. Despite this, flash storage is becoming more affordable and capable. Even if flash remains more expensive, the total cost of ownership, considering performance benefits, might make it more economical than hard drives.

What makes the GenAI Pod important?

• Pure Storage highlighted in September that while traditional AI is mature, the microservices (NIM) space is still developing. The company is collaborating with NVIDIA on vertical use cases within this field and aims to capitalize on small-scale AI training, which many organizations will focus on.

Pure Storage's dedication to enhancing its AI offerings is receiving positive feedback today. Despite this, since reaching its peak in June, the stock has decreased by about 30%. This drop is attributed to a high 40x forward earnings valuation, now reduced to 27x, and a stagnant macroeconomic environment. In September, Pure Storage noted that economic conditions remained unchanged since the year's start. During its Q2 earnings call in late August, the company observed increased buying intentions from organizations, although a positive shift in the storage market is yet to occur.

As the only company operating direct-to-flash, enabling flash to compete more effectively and earlier against hard drives, Pure Storage has significant long-term potential. This is contingent on the continued growth of AI demand, as businesses seek cost-effective solutions for running power and data-intensive AI workloads.