Data storage involves systematically archiving digital information to ensure its availability and security for future use. This encompasses various methods, including direct attached storage, network attached storage, and cloud-based solutions. The rise of GenAI has significantly impacted the data storage landscape, necessitating new architectures to handle the growing volume and complexity of data generated. Innovations such as cloud storage, SSD technology, and emerging solutions like DNA data storage are shaping the future of data management.
The next-generation data storage market is projected to grow from $65.1 billion in 2024 to $90 billion by 2029, exhibiting a compound annual growth rate of 6.7%, according to MarketsandMarkets. This is attributed to the increasing demand for energy-efficient and compact storage solutions, the rising adoption of NVMe technology in enterprise systems, and the expanding use of 5G technology. North America held the largest share of the market in 2023, accounting for 43.4%, largely due to heightened demand from sectors such as banking, financial services, insurance (BFSI), and healthcare.
High-speed storage solutions enable organizations to process large datasets quickly, which accelerates model training and enhances analytical effectiveness. Real-time data processing is another critical application of next-generation storage. By integrating AI with advanced storage systems, organizations can perform immediate analysis essential for sectors like finance, where fraud detection and predictive maintenance are paramount. Storage Area Networks (SANs) optimize throughput and minimize latency, making them ideal for mission-critical applications.
AI-driven technologies can detect anomalies and potential threats in real-time, providing essential protection against cyber threats as data breaches become more common. Next-generation storage systems also support the growing Internet of Things (IoT) by efficiently managing the vast amounts of data generated by connected devices. Many of these systems also integrate seamlessly with cloud services, allowing businesses to leverage scalable storage options while utilizing AI for improved performance.
As the market adapts to these opportunities, we are here to help you find the 10 best data storage stocks to buy according to hedge funds.
Methodology
We sifted through ETFs, online rankings, and internet lists to compile a list of the top data storage stocks. We then selected the 10 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q3 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Data Storage Stocks To Buy According to Hedge Funds
10. Backblaze Inc. (NASDAQ:BLZE)
Number of Hedge Fund Holders: 14
Backblaze Inc. (NASDAQ:BLZE) is a cloud storage provider offering businesses and individuals scalable and cost-effective data storage, protection, and management solutions. Its key services include Backblaze B2 Cloud Storage, an IaaS platform for various use cases, and Backblaze Computer Backup, a subscription-based service for automated data protection.
The company reported 29% year-over-year revenue growth in Q3 2024, recording $32.6 million, with B2 Cloud Storage growing at 39%. B2 Cloud Storage provides affordable, high-performance, and scalable cloud storage for businesses of all sizes. The company prioritizes upskilling its sales team, strengthening key partnerships, and implementing focused sales plays to drive B2 Cloud Storage revenue. It’s witnessing strong demand for B2 Cloud Storage from the AI market, with data stored by AI customers more than doubling year-over-year. It’s also investing in its sales by restructuring its marketing team to target and secure larger customer deals.
The focus on driving B2 Cloud Storage growth is expected to improve profitability, ultimately enabling Backblaze Inc. (NASDAQ:BLZE) to achieve positive adjusted free cash flow by the fourth quarter of 2025. Hence, the company is well-positioned for long-term growth.
9. Dropbox Inc. (NASDAQ:DBX)
Number of Hedge Fund Holders: 29
Dropbox Inc. (NASDAQ:DBX) is a California-based company that provides cloud storage services. It enables users to seamlessly sync files across different devices by creating a special folder that automatically updates with changes made on any linked device. Many individuals, students, professionals, and businesses use it.
The company is pivoting towards AI-powered solutions with its flagship product, Dropbox Dash, to address the challenges of the modern workplace. Employees today struggle to collaborate effectively due to scattered content across numerous cloud tools. Dropbox Dash offers a unified platform for content discovery. It leverages AI to summarize content, answer questions, and provide personalized workspaces.
Dropbox Inc. (NASDAQ:DBX) is initially focusing on its 500,000+ FSS (File Sync and Share) Teams customers for Dash adoption. The company implemented a 20% headcount reduction to align costs with this. The success of Dash will be crucial for the company’s future growth and profitability as it navigates the evolving landscape of AI-powered solutions.