In this article, we will discuss the 10 best Internet of Things (IoT) stocks to buy.
The Internet of Things (IoT) is a vast network connecting physical objects to the internet. Industries are embracing IoT technologies for applications like smart manufacturing and supply chain management. Enterprise IoT spending is expected to slow down in the second half of this year due to economic concerns which will affect corporate spending in general. However, corporate spending on IoT will rebound in 2025. The global market for IoT is expected to grow at a rate of 24.3% annually between 2024 and 2032. In 2032, it is expected to reach a value of $4,062.34 billion.
The rise of smart homes, buildings, and manufacturing, along with advancements in smart infrastructure, is driving significant growth in the IoT market. Moreover, smart city initiatives are becoming increasingly prevalent due to the growing population and expansion of cities. Consumers are adopting smart city solutions, including smart utility meters, transportation, waste management, grids, and air quality controllers.
IoT adoption is also growing rapidly in other sectors, particularly healthcare. The global IoT in healthcare market is projected to expand significantly and reach $952.3 billion by 2032, growing at a compound annual growth rate (CAGR) of 18%. IoT is a major force behind healthcare’s digital transformation, revolutionizing the way medical data is collected, analyzed, and used. This is leading to better patient care, greater operational efficiencies, and innovative treatments.
IoT is also seeing increased adoption in warehouse management. The global IoT warehouse management market is projected to grow from $14.8 billion in 2023 to $57.2 billion by 2033, reflecting a CAGR of 14.5% over the next decade. This growth is driven by the need for better inventory management, increased automation, and improved operational efficiency in logistics and supply chain operations.
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In terms of market segmentation by technologies, WiFi, Bluetooth, and cellular IoT make up 80% of the global IoT market. Wi-Fi accounts for 31% of all IoT connections. On the other hand, Bluetooth is used by 25% of connected IoT devices, and cellular IoT, including 2G, 3G, 4G, 5G, LTE-M, and NB-IoT, accounts for nearly 21% of global IoT connections.
A key trend in the IoT market for 2024 is the integration of AI technologies, including generative AI and edge AI, into IoT devices. Edge AI, in particular, is transforming the IoT landscape. By allowing IoT devices to process and store data locally, edge AI reduces lag and allows real-time responses. Incorporating AI into IoT devices within industries offers numerous benefits, including improved operational efficiency, safety, and decision-making. It plays an important role in predictive maintenance and supply chain management.
The future of IoT looks promising. Businesses and investors can expect significant returns as the technology continues to evolve. Keeping this context in mind, let’s take a look at the best IoT stocks to buy now.
A technician working on a mobile device, indicating the company’s wireless internet access capabilities.
Our Methodology
To create our list of the 10 best IoT stocks to buy, we focused on companies that offer IoT solutions or products, including firms involved in manufacturing IoT devices and hardware. The companies have been shortlisted based on hedge fund sentiment, sourced from our database of over 900 hedge funds. The best IoT stocks have been ranked in ascending order of the number of hedge funds holding a stake in them as of Q2 2024.
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 Internet of Things (IoT) Stocks To Buy
10. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 54
International Business Machines Corporation (NYSE:IBM), a leading American multinational technology company, is known for its wide range of products, including computers, storage systems, networking devices, and servers. Headquartered in Armonk, New York, International Business Machines Corporation (NYSE:IBM) also offers a variety of consulting, technology, and business services, such as cloud computing, IoT, data analytics, and AI.
International Business Machines Corporation (NYSE:IBM) recorded decent financial performance in the last quarter driven by strategic execution, product mix, and productivity initiatives. Revenue increased 2% and the company raised its full-year forecast for free cash flow to over $12 billion.
International Business Machines Corporation (NYSE:IBM) is also pleased with the strong progress of its AI offerings. Each quarter, it is acquiring more clients, expanding partnerships, and launching new innovations. To date, the business related to watsonx and generative AI has exceeded $1 billion, reflecting consistent quarter-over-quarter growth.
In addition to this, International Business Machines Corporation’s (NYSE:IBM) stock is performing quite well and has surged 25% in the last three months, bringing its year-to-date return to over 45%. The stock offers an attractive dividend yield of about 3.1%.
Here’s what Diamond Hill Capital said about International Business Machines Corporation (NYSE:IBM) in its Q2 2024 investor letter:
“Among our bottom Q1 contributors short positions in Dick’s Sporting Goods, International Business Machines Corporation (NYSE:IBM) and Palomar Holdings. Though we believe the quality and durability of IBM’s free cash flow-generating capabilities remain questionable, investor sentiment has improved amid optimism for the company’s still-nascent AI product suite.”
9. Cisco Systems, Inc. (NASDAQ:CSCO)
Number of Hedge Fund Holders: 61
Cisco Systems, Inc. (NASDAQ:CSCO), a leading provider of enterprise networking hardware, is well-positioned to capitalize on the growing IoT market. The company’s product offerings include rugged hardware for industrial applications and software tools like the Cisco Edge Intelligence platform for managing IoT data and devices.
Despite a continued decline in sales, Cisco Systems, Inc. (NASDAQ:CSCO) exceeded expectations, largely due to increased subscription revenue from its $28 billion acquisition of Splunk, which closed in March and marked the company’s largest deal to date. The company’s security revenue rose 81% to $1.8 billion, while collaboration revenue remained stable at around $1 billion. Splunk contributed over $900 million to the overall revenue.
Analysts are generally bullish on Cisco Systems, Inc. (NASDAQ:CSCO) and have rated the stock as a Moderate Buy. The average 12-month price target for Cisco Systems, Inc. (NASDAQ:CSCO) stands at $55.71.
Here’s what Parnassus Investments said about Cisco Systems, Inc. (NASDAQ:CSCO) in its Q2 2024 investor letter:
“During the second quarter, the Fund’s overweight position in the Information Technology sector decreased slightly as we sold our position in Cisco Systems, Inc. (NASDAQ:CSCO) and used most of the proceeds to buy Broadcom, a leading semiconductor company and provider of custom silicon products. Both stocks provide similar exposure to networking technology, but we believe Broadcom offers more upside from AI infrastructure spend and defensiveness due to its software assets.”
8. DexCom, Inc. (NASDAQ:DXCM)
Number of Hedge Fund Holders: 69
DexCom, Inc. (NASDAQ:DXCM), a medical device company, is particularly well-known for its continuous glucose monitoring (CGM) systems for people with diabetes. The company offers a range of products, including the Dexcom G6 and G7, Dexcom Share, and Dexcom ONE, which aim to replace traditional finger-pricking blood sugar testing. The company’s continuous glucose monitoring products have allowed it to be a part of the fast-paced IoT market.
DexCom Inc. (NASDAQ:DXCM)’s management is confident in the CGM market’s growth potential, believing CGMs will become the standard for diabetes treatment. In Q2 2024, DexCom, Inc. (NASDAQ:DXCM) reported an operating margin of 19.5%, reflecting an increase of over 130 bps since Q2 2023. Meanwhile, the company’s free cash flow rose by over 70% compared to the first half of 2023.
DexCom, Inc. (NASDAQ:DXCM) has also consistently beat EPS estimates in the last 4 quarters. The stock has received an average “Strong Buy” rating from analysts, making it one of the best IoT stocks to buy now.
Here’s what Artisan Partners said about DexCom, Inc. (NASDAQ:DXCM) in its Q2 2024 investor letter:
“Dexcom detracted from performance in the quarter as the stock price gave back all the strong gains from the first quarter of this year. The company reported strong first quarter earnings, beating consensus estimates for the top and bottom lines, highlighted by 25% organic revenue growth. Additionally, it raised the low end of full-year revenue guidance based on the strong start to the year, with record new patient starts. Dexcom is launching an over-the-counter continuous glucose monitoring device set to target the over 25 million Type 2 diabetes patients who are not dependent on insulin. Furthermore, the medical device company recently expanded its salesforce to better address the ~200K primary care physicians in the United States. We see several catalysts going forward, and the stock is trading at a discount to historical valuation metrics.”
7. QUALCOMM Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Holders: 100
QUALCOMM Incorporated (NASDAQ:QCOM), a leading American tech company based in San Diego, develops semiconductors, software, and services for wireless technology. The company holds key patents for 5G, 4G, and other mobile communication standards.
QUALCOMM Incorporated (NASDAQ:QCOM) reported strong Q3 2024 results, with revenue up 11% to $9.39 billion and earnings per share at $1.88. Licensing revenue reached $1.4 billion. Analysts predict continued growth, with revenue expected to increase by 10% in 2025 and earnings by 13.10%. The company’s focus on AI and expanding automotive and IoT presence positions it for future success. QUALCOMM Incorporated (NASDAQ:QCOM) has received an average “Moderate Buy” rating.
Here’s what Aristotle Capital Management, LLC, said about QUALCOMM Incorporated (NASDAQ:QCOM) in its Q2 2024 investor letter:
“Qualcomm, a leading wireless communications technology company, was the largest contributor for the quarter. After a period of weaker global demand for smartphones (driven by a slowdown in China) and elevated channel inventory, demand from Chinese handset manufacturers accelerated 40% year‐over‐year. More importantly, in our opinion, Qualcomm continues to execute on a previously identified catalyst of shifting its business mix beyond smartphones. The company announced increased progress for its automotive and Internet of Things (IoT) solutions. Within auto, the increase in vehicle content has resulted in 35% year‐over‐year revenue growth, with a design win pipeline of ~$45 billion, keeping the company on track to achieving ~$4 billion in auto‐related revenues by 2026. In recent years, despite persistent threats of insourcing from large clients (most notably Apple), Qualcomm has been able to retain its high market share in handsets while simultaneously expanding in non‐smartphone devices. We believe this progress is a testament to Qualcomm’s history of high (and productive) R&D spending, resulting in technological superiority. We believe Qualcomm’s technologies will continue to benefit as the world stays on a path toward a proliferation of connectivity between varying devices and as AI applications extend from the cloud to on‐device.”
6. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders: 130
Broadcom Inc. (NASDAQ:AVGO) is a leading semiconductor company specializing in wired and wireless communication solutions including IoT applications. The company offers a wide range of system-on-a-chip (SoC) solutions that enable voice, video, data, and multimedia connectivity in various environments, including homes, offices, and mobile devices. It also offers solutions for end-to-end monitoring across the IoT ecosystem which includes gateways, APIs, networks, apps, & infrastructures.
Broadcom Inc. (NASDAQ:AVGO) reported strong Q3 FY2024 results with revenue up 47% to $13.1 billion, driven by AI semiconductor solutions and VMware. Meanwhile, EBITDA increased 42% to $8.2 billion. The company expects Q4 FY2024 revenue of $14 billion and EBITDA margin of 64%.
With the company’s solid position in the growing tech sector and its diverse range of products, analysts see Broadcom Inc. (NASDAQ:AVGO) as one of the best IoT stocks to buy. Broadcom Inc. (NASDAQ:AVGO) has received an average Buy rating.
Here’s what Baron Funds said about Broadcom Inc. (NASDAQ:AVGO) in its Q2 2024 investor letter:
“Broadcom Inc. (NASDAQ:AVGO) is a global technology leader that designs, develops, and supplies a broad range of semiconductor and infrastructure software solutions. The stock rose during the quarter as it reported strong earnings on the back of its two key growth drivers, AI semiconductors and its acquired VMware software business. The company once again increased its outlook for AI-related revenue, now expecting $11 billion or more this year (versus prior guidance for $10 billion), on the back of strength in both hyperscale custom compute and networking chips, where Broadcom maintains dominating share. In networking, Broadcom’s solutions are critical to enabling AI training factories to scale towards 100,000 chip clusters in the near term and 1 million chip clusters over the coming years. In AI custom compute, Broadcom designs custom accelerators for large consumer- internet AI companies (such as Google and Meta), who are building increasingly large AI clusters to drive improvements in user engagement and targeted advertising on their consumer media platforms. VMware remains on track to continue rapid sequential growth while simultaneously reducing operating expenses, driving faster-than-expected margin expansion and accretion, as management has simplified the product offering and is converting customers from a license model to subscriptions. We believe VMware will grow beyond the $4 billion near-term quarterly target, well above current analyst expectations. These two factors combined have caused a re-rating to the growth profile for the overall company. To quote CEO Hock Tan, “there is only one Broadcom. Period.”
5. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 184
Apple Inc. (NASDAQ:AAPL) is a tech giant renowned for its innovative products. The iPhone, a well-known product by Apple Inc. (NASDAQ:AAPL), has been central to the company’s IoT strategy.
At the Worldwide Developers Conference, Apple Inc. (NASDAQ:AAPL) shared exciting updates, including Apple Intelligence. This feature builds on years of AI and machine learning innovation and offers writing tools for self-expression, an image playground for creative image generation, and powerful tools for summarizing notifications.
Apple Inc. (NASDAQ:AAPL) reported a new record for June quarter revenue, reaching $85.8 billion, a 5% increase compared to the previous year. Furthermore, earnings per share grew by double digits to $1.40. The company also achieved quarterly revenue records in over two dozen countries and regions, including Canada, France, Mexico, Germany, India, the UK, Indonesia, Thailand, and the Philippines. Moreover, Apple Inc. (NASDAQ:AAPL) set an all-time revenue record in services, which grew by 14%.
Due to its financial strength, strong brand image, and product diversification, Apple Inc. (NASDAQ:AAPL) has received an average rating of “Moderate Buy.”
Here’s what Baron Funds said about Apple Inc. (NASDAQ:AAPL) in its Q2 2024 investor letter:
“Recent Activity This quarter we re-initiated a position in Apple Inc., a leading technology company known for its innovative consumer electronics products like the iPhone, MacBook, iPad, and Apple Watch. Apple is a leader across its categories and geographies, with a growing installed base that now exceeds 2 billion devices globally. The company’s attached services – including the App Store, iCloud, Apple TV+, Apple Music, and Apple Pay – provide a higher margin, recurring revenue stream that both enhances the value proposition for its hardware products and improves the financial profile. Apple now has well over 1 billion subscribers paying for these services, more than double the number it had just 4 years ago. The increasing services mix has led to healthy operating margin improvement, providing more free cash flow for Apple to reinvest in the business and to distribute to shareholders. Throughout its 48-year history, Apple has successfully navigated and capitalized on major technological shis, from PCs to mobile to cloud computing. We believe the company’s leading brand and device ecosystem position it to do equally well in the AI age, and this was the driver of our decision to re-invest. “Apple Intelligence” – the AI strategy unveiled at Apple’s recent Worldwide Developer Conference – leverages on- device AI and integrations with tools like ChatGPT to enhance user experiences across its ecosystem. The AI suite enables users to create new images, summarize and generate text, and use Siri to perform actions across their mobile applications, all while maintaining user privacy and security. We think Apple Intelligence can drive accelerated product upgrade cycles and higher demand for Apple services. The combination of growth re-acceleration, increasing services contribution, and thoughtful capital allocation should continue driving long-term shareholder value.”
4. Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders: 216
Alphabet Inc. (NASDAQ:GOOGL) has expanded its offerings to include IoT solutions. Through Google Home and Google Cloud’s IoT platform, the company provides consumers and businesses with the tools to build connected devices and leverage advanced data analytics.
In the second quarter, the cloud business achieved key milestones, with quarterly revenues exceeding $10 billion for the first time and surpassing $1 billion in operating profit. So far this year, their AI infrastructure and generative AI tools have contributed billions in revenue and are now being utilized by over 2 million developers. Moreover, in Q2 2024, Alphabet Inc. (NASDAQ:GOOGL) surpassed earnings expectations, reporting an EPS of $1.89, compared to the expected $1.85.
Analysts are predicting strong earnings growth in the coming years, making Alphabet Inc. (NASDAQ:GOOGL) an attractive investment. On average, the stock has a “Strong Buy” rating.
Here’s what Diamond Hill Capital said about Alphabet Inc. (NASDAQ:GOOGL) in its Q2 2024 investor letter:
“Among our top individual contributors in Q2 were Amazon, Texas Instruments and Alphabet Inc. (NASDAQ:GOOG). Media and technology company Alphabet also continued delivering strong results in its search, YouTube advertising, YouTube subscription and cloud businesses. Shares rose amid an environment that continues favoring mega-cap technology companies.”
3. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 219
Meta Platforms, Inc. (NASDAQ:META), the tech giant formerly known as Facebook, has been taking significant steps to leverage artificial intelligence (AI) to improve its social media platforms. The company’s recent introduction of AI-powered image editing tools and new chat stickers on Instagram is a prime example of this strategy.
Meta Platforms, Inc. (NASDAQ:META) has demonstrated impressive financial performance over the past decade, with a compound annual revenue growth rate of 29.7%. As the global digital ad market is going to expand significantly, reaching over $1 trillion by 2030, the company is well-positioned to capitalize on this growth. Meta Platforms, Inc. (NASDAQ:META) has maintained an average operating margin of 34.8% in the past five years. These strong financials are fueled by cost-cutting measures and a focus on operational efficiency.
Meta’s substantial cash reserves of $58.1 billion and free cash flow generation of $10.9 billion reported during the most recent quarter enable it to invest aggressively in AI initiatives. The stock has received a consensus rating of “Strong Buy” from analysts.
Here’s what Mar Vista Investment Partners, LLC said about Meta Platforms, Inc. (NASDAQ:META) in its Q2 2024 investor letter:
“During the quarter, we established new investments in Broadcom and Meta Platforms, Inc. (NASDAQ:META). We previously divested from Meta during a period of stagnant advertising growth and the company’s initial, significant investment in the metaverse project. At that time, investors appeared complacent to the risks associated to an increasingly competitive landscape, and the Street’s robust financial expectations as the company transitioned towards monetizing short-format video (Reels). The subsequent decline in Meta’s stock price during 2022 reflected these concerns.
2. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 279
Microsoft Corporation (NASDAQ:MSFT), a leading tech giant, is a pioneer in IoT solutions, providing customers with a full range of offerings, from IoT SaaS and PaaS to essential hardware components. The company’s extensive experience managing Windows devices remotely has been instrumental in building the powerful Azure IoT platform.
Microsoft Corporation (NASDAQ:MSFT) reported strong Q4 2024 results. Revenue increased 16% to $245.1 billion, driven by growth in all segments, particularly Azure and other cloud services. Net income rose 22% to $88.1 billion. Meanwhile, Microsoft Corporation (NASDAQ:MSFT)’s cloud revenue reached $36.8 billion, up 21% year-over-year.
With the company’s strong financial performance, analysts are optimistic about its future. The stock has received an average “Moderate Buy” rating with a price target of $494.72.
Here’s what Mar Vista Investment Partners, LLC said about Microsoft Corporation (NASDAQ:MSFT) in its Q2 2024 investor letter:
“Microsoft Corporation (NASDAQ:MSFT) continues to occupy a strong position, poised to capture market share as businesses, both large and small, navigate the transition to a digital-first landscape and embrace generative AI-driven solutions. The company’s commanding presence in the enterprise arena, combined with its comprehensive product portfolio encompassing Infrastructure-as-a-Service (IaaS), Platform-as-a-Service (PaaS), and Software-as-a-Service (SaaS), establishes it as a crucial provider of IT solutions for companies of all scales. Microsoft is effectively executing its strategy in a sizable market by offering a roadmap for digital transformation and adoption of innovative, AI-driven solutions, such as ChatGPT, while enhancing productivity and reducing costs. Consequently, we anticipate that Microsoft’s solutions should exhibit resilience even in a more challenging macroeconomic environment, supporting low-double-digit growth in intrinsic value within our investment horizon.”
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 308
Amazon.com, Inc. (NASDAQ:AMZN) is a leader in multiple tech sectors, including online retail, cloud computing (AWS), advertising, streaming, and AI. The company’s reach extends beyond the web, with the AWS IoT platform allowing it to connect vast networks of internet-connected devices and sensors to its cloud services for data analysis. The company has utilized its innovative technology to provide cutting-edge solutions for industrial and manufacturing companies with AWS IoT Sitewise.
Amazon.com, Inc. (NASDAQ:AMZN) reported strong Q2 2024 results with net sales reaching $148 billion, a 10% year-over-year increase. This growth was driven by all segments, with AWS showing the most significant jump at 19%. Operating income also rose significantly to $14.7 billion. Looking ahead, Amazon.com, Inc. (NASDAQ:AMZN) expects sales growth of 8% to 11% for Q3 2024.
Analysts are confident in Amazon.com, Inc.’s (NASDAQ:AMZN) future growth potential with its strong financial performance and diversification in different segments. The stock has received a consensus Buy rating with a 12-month target price of $222.8.
Here’s what Meridian Funds said about Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2024 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN) is a global technology company that operates e-commerce, cloud computing, digital advertising, and other businesses. We own Amazon because we believe it is well-positioned to benefit from several strong secular trends, including the shift to online shopping, the growth of cloud computing, and the increasing importance of digital advertising. The company exceeded expectations in the first quarter, with cloud-computing revenue growth accelerating, driven by easing cost optimization pressures and the ramp of generative AI workloads. The North American retail segment drove record operating margins, highlighting the success of Amazon’s efforts to improve efficiency and lower its cost to serve. International retail also showed promise, as emerging markets steadily progressed towards profitability. Given the strength across these key segments, we continue to hold the position in the company.”
Overall, Amazon.com, Inc. (NASDAQ:AMZN) ranks first among the 10 best Internet of Things (IoT) stocks to buy. While we acknowledge the potential of IoT companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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