In this article, we will discuss the 11 best edge computing stocks to buy now.
The information technology sector has consistently outperformed both investor and analyst expectations in 2023. This impressive trend can be largely attributed to key advancements such as the emergence of artificial intelligence (AI) and generative AI, which have driven a substantial surge in tech stock prices, reaching unprecedented highs. Nevertheless, AI isn’t the sole tech domain warranting investor consideration at this juncture. Another captivating area of growth and investment lies in Edge Computing. Also known as Mobile Edge Computing (MEC) or Multi-Access Edge Computing, Edge Computing is a decentralized framework that strategically positions processing and storage resources for applications in proximity to where data is either generated or consumed. By maintaining computational capacity near users, devices, or data sources, edge solutions offer advantages like reduced latency, increased bandwidth, local device processing, and data offloading. These enhancements result in improved performance, security, operational efficiency, and reliability for applications and services. As indicated by Accenture, this approach enhances the user experience for consumers utilizing the Internet of Things (IoT) or smart vehicles, as well as for businesses employing robots and various electronic devices in their operations, such as smart kitchens.
The increasing demand for localized network infrastructure and edge computing capabilities is underscored by the above-mentioned IoT technology. This surge in connected devices is generating a mounting volume of data at the endpoints, straining the capacities of traditional network structures. In addition, the advent and adoption of 5G, the fifth generation of cellular network technologies offering substantially greater bandwidth, is not only accelerating the growth of IoT but also paving the way for the widespread adoption of edge computing. Moreover, AI-optimized processors, where companies like NVIDIA Corporation (NASDAQ:NVDA) and Intel Corporation (NASDAQ:INTC) lead the charge, are facilitating the broader integration of edge systems.
In 2022, the global edge computing market reached a value of $11.99 billion, and it is anticipated to experience significant growth. Projections from Fortune Business Insights indicate that the market will increase from $15.96 billion in 2023 to a substantial $139.58 billion by 2030, demonstrating an impressive Compound Annual Growth Rate (CAGR) of 36.3% throughout the forecast period. This growth is driven by the escalating adoption of edge devices, spanning from IoT devices like mobile point-of-sale kiosks and smart cameras to computational infrastructure, enabling faster and real-time data analysis at the source. The industry is further poised for expansion due to the influence of emerging technologies such as Industry 4.0 and AI, which are set to propel the sector’s growth.
With these details in mind, let’s take a look at some of the best edge computing stocks out of which the top picks include Hewlett Packard Enterprise Company (NYSE:HPE), Microsoft Corporation (NASDAQ:MSFT), and NVIDIA Corporation.
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Our Methodology
To create our selection of the best edge computing stocks for investment, we began by assembling a roster of companies that are actively involved in the provision of edge computing software and hardware services. Subsequently, we identified the number of hedge funds that retained these stocks in their portfolios as of Q2 2023.
11. Fastly, Inc. (NYSE:FSLY)
Number of Hedge Fund Holders: 19
Fastly, Inc. (NYSE:FSLY) is an American company specializing in cloud computing services that defines its network as an edge cloud platform, strategically crafted to empower developers in expanding their core cloud infrastructure to the edge of the network, bringing it closer to end-users.
Fastly, Inc.’s third-quarter results, ending on September 30, showed a notable improvement. The company reported an adjusted earnings per share loss of $0.06, compared to a loss of $0.14 per share in the same quarter of 2022. Additionally, its revenue increased by 18% year-over-year, reaching $127.8 million. Fastly, Inc.’s remaining performance obligations, which signifies the future revenue commitments to customers, grew by 7% from the second quarter and an impressive 43% from a year ago, amounting to $248 million. Notable highlights for the quarter also include Fastly, Inc.’s acquisition of Domainr, a domain status application programming interface provider, in August. This acquisition expanded Fastly’s domain API capabilities, further enhancing its edge cloud platform.
Insider Monkey took a look at 910 hedge funds for their second quarter of 2023 investments and found out that 19 had held a stake in the company. Out of these, Richard Driehaus’ Driehaus Capital is Fastly, Inc.’s largest shareholder since it owns 2.99 million shares that are worth $47/28 million.
Much like Hewlett Packard Enterprise Company, Microsoft Corporation, and NVIDIA Corporation, Fastly, Inc. ranks as one of the best edge computing stocks to invest in.
10. Akamai Technologies, Inc. (NASDAQ:AKAM)
Number of Hedge Fund Holders: 29
Akamai Technologies, Inc. (NASDAQ:AKAM) is the world’s largest Content Delivery Network (CDN), responsible for managing a substantial portion of the daily data flow on the internet. With its roots tracing back to the dot-com era, the company has experienced consistent growth, aligning with the ever-expanding internet traffic. Akamai Technologies, Inc. provides a range of cloud services geared towards safeguarding, delivering, and processing content, applications, and software across the internet.
On September 20, Ivan Feinseth, an analyst at Tigress Financial, reaffirmed a “Strong Buy” rating for Akamai Technologies, Inc.. Additionally, the analyst retained a price target of $132 for the company’s stock.
There were 29 hedge funds long Akamai Technologies, Inc. in the second quarter. Their total stake value in the company was $535.9 million. Marshall Wace LLP was the largest shareholder in Akamai Technologies, Inc. at the end of the second quarter, holding 1.6 million shares in the company.
9. Cloudflare, Inc. (NYSE:NET)
Number of Hedge Fund Holders: 38
Cloudflare, Inc. (NYSE:NET) is an American company based in San Francisco, California, specializing in offering a wide range of services, including content delivery network services, cloud cybersecurity, DDoS mitigation, and ICANN-accredited domain registration services.
In Q3 2023, Cloudflare, Inc. reported results that surpassed the expectations of Wall Street analysts. The company achieved a remarkable 32.2% year-on-year increase in revenue, reaching $335.6 million. Furthermore, the company’s revenue guidance for the full year exceeded analysts’ estimates. In terms of earnings per share (EPS), Cloudflare, Inc. posted a non-GAAP profit of $0.16 per share, marking significant improvement compared to its profit of $0.06 per share in the same quarter the previous year.
As of the end of the second quarter of 2023, 38 hedge funds out of the 910 hedge funds tracked by Insider Monkey had stakes in Cloudflare, Inc.. The biggest hedge fund stakeholder of Cloudflare, Inc. was Hamilton Helmer’s Strategy Capital which owns a $94 million stake in the company.
Baron Fifth Avenue Growth Fund made the following comment about Cloudflare, Inc. in its Q1 2023 investor letter:
“We also added to Cloudflare, Inc. during the quarter, the leading cloud-based networking and software infrastructure provider. Despite facing a macro-driven elongation of deal cycles, the company reported solid quarterly results with 42% year-over-year revenue growth, while also guiding to 37% growth for 2023. The company’s speed of innovation enables it to continuously grow its opportunity set as it adds more products to its platform, solving additional problems for customers from network services to zero-trust. Its scale-based competitive advantages enable it to be the low-cost provider in the industry, while also having significant volumes of data to power its AI models and improve its product over time. Once it gets customers on board, Cloudflare is then able to cross-sell them additional networking and security solutions at high marginal profitability, as they are served on the same underlying infrastructure and thus the company doesn’t need to spend once more on customer acquisition. This creates a virtuous cycle that should enable Cloudflare to become an important part of the infrastructure layer of organizations over time, in our view.”
8.Hewlett Packard Enterprise Company (NYSE:HPE)
Number of Hedge Fund Holders: 50
The Hewlett Packard Enterprise Company is an American multinational information technology company headquartered in Spring, Texas, United States. HPE was established on November 1, 2015, in Palo Alto, California, as part of the split of the Hewlett-Packard company. The standout success for Hewlett Packard Enterprise Company in the third quarter was the company’s Intelligent Edge segment, encompassing IoT (Internet of Things), OT (Operational Technology) devices, and edge computing hardware. Intelligent Edge generated revenues of $1.4 billion, marking a substantial 50% increase compared to the same quarter the previous year. These revenues accounted for approximately 20% of HPE’s total earnings for the quarter.
On October 20, UBS analyst David Vogt increased the firm’s price target for Hewlett Packard Enterprise Company to $16, up from the previous target of $15, while maintaining a “Neutral” rating on the company’s shares. According to the analyst, the company outlined substantial Total Addressable Market (TAM) expansion, particularly in the areas of Networking and Artificial Intelligence, to support a multi-year revenue growth target of 2%-4% in constant currency terms.
At the end of Q2 2023, 50 hedge funds tracked by Insider Monkey reported having stakes in Hewlett Packard Enterprise Company, a sharp increase from 37 in the previous quarter. These stakes have a total value of roughly $1.14 billion. The biggest hedge fund stakeholder of Hewlett Packard Enterprise Company was Richard S. Pzena’s Pzena Investment Management which owns a $208 million stake in the company.
7. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 51
The International Business Machines Corporation (NYSE:IBM), often referred to as “Big Blue,” is a prominent American multinational technology company headquartered in Armonk, New York. Earlier this year, the company unveiled a data center rack mount configuration that enables enterprise customers to seamlessly integrate IBM’s sustainability-focused hybrid cloud platform into a broader spectrum of data center environments. With the introduction of the new IBM z16 and LinuxONE 4 systems, International Business Machines Corporation is not only paving the way for innovative sustainable designs and edge computing applications but also helping to minimize the physical space requirements of data centers while optimizing cooling and heating technologies.
Of the 910 hedge funds in Insider Monkey’s database at the end of Q2 2023, 51 hedge funds owned stakes in International Business Machines Corporation, up from 49 a quarter earlier. These stakes have a collective value of roughly $814 million.
6. Arista Networks, Inc. (NYSE:ANET)
Number of Hedge Fund Holders: 62
Arista Networks, Inc. (NYSE:ANET) is an American computer networking company with its headquarters situated in Santa Clara, California. The company specializes in the design and sale of multilayer network switches that facilitate software-defined networking for extensive data center, cloud computing, high-performance computing, and high-frequency trading environments.
In early September, Arista Networks, Inc. made an announcement stating that it had been selected by Spark as a private cloud networking provider to facilitate Spark’s data center networking services for a fresh private telecommunications cloud platform. This newly established private cloud network is set to host applications serving Spark’s mobile voice and data customers and assist in the deployment of Spark’s 5G network. This initiative aims to enhance flexibility, reliability, and scalability for software-defined networks and their underlying systems.
During this year’s second quarter, 62 out of the 910 hedge funds researched by Insider Monkey had invested in the firm. Arista Networks, Inc.’s largest investor out of these is Andreas Halvorsen’s Viking Global courtesy of a $330 million investment.
Arista Networks, Inc. joins the likes of Hewlett Packard Enterprise Company, Microsoft Corporation, and NVIDIA Corporation as one of the best edge computing stocks investors should take note of.
5. Intel Corporation (NASDAQ:INTC)
Number of Hedge Fund Holders: 71
Intel Corporation is an American multinational corporation and technology company headquartered in Santa Clara, California. It holds a prominent position as one of the world’s leading semiconductor chip manufacturers in terms of revenue and a significant contributor to the advancement of the x86 series of instruction sets, which are widely employed in personal computers. In addition, the company offers edge computing solutions. The Intel Smart Edge Open is an open-source Mobile Edge Computing (MEC) toolkit designed to facilitate the efficient and high-performing deployment of edge platforms for applications and network functions. It empowers seamless onboarding and management, offering cloud-like flexibility across various network types.
Intel Corporation experienced a remarkable 9% surge in its stock price on October 27, fueled by the release of the company’s third-quarter earnings report, which surpassed expectations. This impressive performance can be attributed to the success of Intel’s foundry business, heightened interest in artificial intelligence, and positive signs of a PC market recovery. Intel Foundry Services (IFS), responsible for chip manufacturing for corporate and government clients, achieved outstanding results with $311 million in revenue, marking a significant 299% growth compared to the same period in the previous year.
As of the end of Q2 2023, 71 hedge funds tracked by Insider Monkey reported having stakes in Intel Corporation, up from 68 in the previous quarter. The consolidated value of these stakes is over $2.55 billion. With over 11 million shares, Millennium Management was the company’s leading stakeholder in Q2.
ClearBridge Investments mentioned INTC in its Q3 2023 investor letter. Here is what the firm has to say:
“We also added to our position in Intel Corporation (NASDAQ:INTC) to take advantage of signs that it continues to make progress on its goal of regaining technology leadership. Intel appears to be executing its technology/product roadmap; the company is on track to ramp up PC and server products over the next 12 months on advanced manufacturing nodes that we believe will be more competitive with chief rival Advanced Micro Devices. We also see green shoots in the PC and server markets, with an increasing possibility of a cyclical recovery in both end markets in 2024.”
4. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 152
Alphabet Inc. (NASDAQ:GOOG) is a major player in the technology industry. At its core is Google, a search engine that processes billions of queries daily. The company also owns various video streaming and productivity platforms, with YouTube being one of its notable assets. Furthermore, Alphabet Inc. is involved in the retail of electronic devices, including smartphones, ultra-thin notebooks, and speakers. In terms of edge computing, the GDC Edge Appliance is a Google Cloud-managed, secure, high-performance appliance designed for edge locations. It offers local storage, machine learning inference, data transformation, and export capabilities. Alphabet Inc. states that the Edge Appliance is aimed at enterprises operating in sectors such as manufacturing, supply chain, healthcare, and automotive, where there are demands for low-latency and high throughput solutions.
As the close of the second quarter of 2023, 152 hedge funds had stakes in Alphabet Inc.. The most significant stakeholder of the company was Natixis Global Asset Management’s Harris Associates which owns a $3.21 billion stake in the company.
Ensemble Capital Management made the following comment about Alphabet Inc. in its Q3 2023 investor letter:
“Alphabet Inc. (NASDAQ:GOOG) (+9.32%): Separate from all the discussion of artificial intelligence, Google’s core Search business, having experienced a significant slowdown in 2022, now shows clear signs of reacceleration. While the future of AI and its impact on Google is still subject to a healthy debate, the company seems to have put to bed investor concerns about any rapid negative impact. With Search revenue growth accelerating, and the company rolling out lots of new AI tools, the investor panic from the beginning of the year about AI immediately hurting Google appears to have been overblown.”
3. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 175
Nvidia Corporation is an American multinational technology company that is incorporated in Delaware and headquartered in Santa Clara, California. NVIDIA Corporation is recognized for its expertise in developing integrated circuits, which find applications in a wide range of devices, from electronic game consoles to personal computers (PCs). Notably, the NVIDIA EGX platform extends the capabilities of accelerated computing from data center to edge locations, offering a variety of optimized hardware components, along with user-friendly deployment, applications, and management software.
Insider Monkey took a look at hedge fund portfolios for NVIDIA Corporation’s Q2 2023 investments and found out that 175 had a stake in NVIDIA Corporation. Citadel Investment Group was its biggest stakeholder which has roughly 21.4 million stakes for about $9 billion of NVIDIA Corporation.
Baron Opportunity Fund made the following comment about NVIDIA Corporation in its Q3 2023 investor letter:
“NVIDIA Corporation (NASDAQ:NVDA) is a leading semiconductor company that sells chips and software for accelerated computing and gaming. Shares have nearly tripled year-to-date, as the company continues reporting unprecedented growth because of the acceleration in demand for its data center chips. After reporting revenue of $7 billion in the first quarter and providing guidance of $11 billion for the second quarter, NVIDIA reported second quarter revenue of $13.5 billion and guided for another step up in the third quarter to $16 billion, with its CFO declaring “[d]emand for our Data Center platform for AI is tremendous and broad-based across industries and customers.” We are at the tipping point of a new era of computing with NVIDIA at its epicenter. This is how CEO and founder Jensen Huang put it (during the company’s August 23 earnings call):
“[T]he easiest way to think about the demand is the world is transitioning from general purpose computing to accelerated computing…[W]hat you’re seeing companies do now is recognizing this…tipping point…recognizing the beginning of this transition, and diverting their capital investment to accelerated computing and generative AI…This isn’t a singular application that is driving the demand, but this is a new computing platform…a new computing transitioning that’s happening…A new computing era has begun. The simultaneously going through two platform transitions, accelerated computing and generative AI.””
2. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 278
Amazon.com, Inc. (NASDAQ:AMZN) is a leading American multinational technology company with a diverse range of business interests. These include e-commerce, cloud computing through Amazon Web Services (AWS), online advertising, digital streaming, and artificial intelligence. The company’s cloud service division offers edge computing services as well. For instance, AWS edge services facilitate data processing, analysis, and storage in proximity to end-user devices, enabling the deployment of APIs and tools at locations outside of AWS data centers.
On November 2, HSBC initiated coverage of Amazon.com, Inc. with a “Buy” rating and a price target of $160. The analysts at the firm highlight that Amazon’s potential in the cloud computing space exceeds the strong customer loyalty in e-commerce. HSBC also emphasizes that Amazon Web Services (AWS) continues to be one of the most compelling narratives in the technology sector. In addition, the firm asserts that any short-term growth challenges do not undermine the long-term growth prospects of the company.
Based on data from Insider Monkey’s database, a total of 278 elite hedge funds held positions in Amazon.com, Inc. stock, with a collective stake value of $34.9 billion. This represents an increase from the 243 hedge funds that collectively held a stake valued at $25.7 billion previously. Notably, Chicago-based Harris Associates emerged as the most significant stakeholder in the company, with 15.6 million shares valued at $2.036 billion.
White Falcon Capital Management mentioned Amazon.com, Inc. in its third quarter 2023 investor letter. Here is what it said:
“There are comparable narratives involving NU Holdings, Amazon.com, Inc., and Teck Resources, to name a few holdings from the White Falcon portfolio. Amazon constructed its logistics network and cloud computing infrastructure using yesterday’s currency, but it is poised to capitalize on this network with the inflated dollars of tomorrow. In essence, we believe we hold wonderful businesses with growing revenue streams and potential for operating leverage – all at reasonable valuations.”
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 300
Microsoft Corporation is an American multinational technology company headquartered in Redmond, Washington. The company is most renowned for its software products, including the Windows line of operating systems, the Microsoft 365 suite of productivity applications, and the Edge web browser. When it comes to the realm of edge computing, Microsoft Azure has rapidly gained prominence by actively supporting edge initiatives in both hardware and software.
In a recent announcement, Microsoft Corporation revealed its financial results for the first quarter of the 2024 fiscal year. The tech giant posted impressive revenue of $56.5 billion, accompanied by a net income of $22.3 billion in Q1. These figures represent substantial growth, with revenue increasing by 13% and net income surging by 27%. Although the Devices segment faced some challenges during this quarter, there was a modest recovery observed in the Windows division. Notably, Microsoft Corporation’s cloud services and Office suite enjoyed significant growth, with the company’s Cloud revenue reaching $31.8 billion, demonstrating a 24% year-over-year growth.
Microsoft Corporation also distributed a quarterly dividend of $0.75 per share and recently raised this dividend by 10% in September of the current year. This marks the 17th consecutive year of dividend growth for the company. As of November 4, MSFT stock offers a dividend yield of 0.85%.
According to Insider Monkey’s Q2 2023 database, Microsoft Corporation was the most popular stock among hedge funds, with 300 funds holding stakes in the company, collectively valued at nearly $70 billion.
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This article is originally published at Insider Monkey.
