We recently compiled a list of the Edge Computing Market Size and 7 Best Stocks To Buy. In this article, we are going to take a look at where Alphabet Inc. (NASDAQ:GOOG) stands against the other edge computing stocks.
What is Edge Computing?
The information technology sector has consistently outperformed investor and analyst expectations in 2023, and this trend appears to be continuing into the current year. This impressive performance can largely be attributed to significant advancements such as the rise of artificial intelligence (AI) and generative AI, which have driven tech stock prices to unprecedented highs. Of course, AI is not the only area that is revolutionizing the technology space. Edge Computing comes in as another compelling area of growth and investment. Also known as Mobile Edge Computing (MEC) or Multi-Access Edge Computing, Edge Computing focuses on bringing computing power closer to where data is generated, rather than relying on a centralized cloud-based system. In layman’s terms, Edge Computing involves relocating part of the storage and computing capabilities from a central data center to locations near the data sources.
By keeping computational capacity close to users, devices, or data sources, edge solutions offer benefits such as reduced latency, increased bandwidth, local device processing, and data offloading. For instance, smart speakers perform minimal computational work, sending requests to servers owned by the provider. With Edge Computing, smart speakers could process a user’s request entirely on the device itself. Gartner, in its March 2024 Market Guide for Edge Computing, states:
“By placing data, data management capabilities and analytic workloads at optimal points, ranging all the way to endpoint devices, enterprises can enable more real-time use cases. In addition, the flexibility to move data management workloads up and down the continuum from centralized data centers or from the cloud-to-edge devices will enable greater optimization of resources.”
Edge Computing with the Internet-of-Things & Artificial Intelligence
The automotive industry is a prime example of rapid advancements driven by edge computing and artificial intelligence (AI) integration in recent years. As vehicles evolve to incorporate self-driving capabilities, these technologies have become essential for effective decision-making and real-time responses. For instance, Tesla leverages extensive real-world driving data to refine its AI algorithms for autonomous driving. The rollout of EV maker’s Full Self-Driving (FSD) beta software to more drivers highlights its performance in real-world conditions, with the vast amount of visual data collected during these drives enhancing the company’s AI learning process.
Furthermore, the advent and adoption of 5G, the fifth generation of cellular network technologies offering substantially greater bandwidth, is accelerating the growth of Internet-of-Things (IoT) and facilitating the widespread adoption of edge computing. With 5G networks enabling lightning-fast speeds and a greater number of connected devices, data volumes are expected to surge. Predictions state that by 2025, every connected person will interact with digital data at least once every 18 seconds, largely due to the billions of IoT devices projected to generate over 90 zettabytes of data by then.
Edge Computing Market to Reach $217 Billion by 2032
According to a report by Fortune Business Insights, the global edge computing market was valued at $15.96 billion in 2023 and is projected to grow from $21.41 billion in 2024 to $216.76 billion by 2032, at a compound annual growth rate of 33.6% over the forecast period. This growth is fueled by the increasing adoption of edge devices, ranging from IoT devices such as mobile point-of-sale kiosks and smart cameras to computational infrastructure that enables faster and real-time data analysis at the source. On the other hand, PwC projects that the global market for edge data centers will nearly triple, growing from $4 billion in 2017 to $13.5 billion this year. This expansion is driven by the potential of locally situated data centers to reduce latency, manage intermittent connections, and facilitate data storage and computation close to end-users.
With these details in mind, let’s take a look at some of the best edge computing stocks to buy now.
Our Methodology
For our list of the best edge computing stocks, We began by sifting through ETFs’ holdings and online rankings to gather a preliminary list of 15 stocks. We then scanned Insider Monkey’s first-quarter database which tracks 920 elite money managers and selected the top seven that were the most widely held by hedge funds.
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).
A laptop and phone open to Google’s services in an everyday setting.
Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 166
In the realm of edge computing, Alphabet Inc. (NASDAQ:GOOG)’s Google Distributed Cloud (GDC) Edge component is a secure, high-performance device managed by Google Cloud and designed for edge locations. It provides local storage, machine learning inference, data transformation, and export capabilities. Alphabet Inc. (NASDAQ:GOOG) targets this component at enterprises in industries such as manufacturing, supply chain, healthcare, and automotive, which require low-latency and high-throughput solutions. The company ranks as one of the best edge computing stocks in this regard.
Insider Monkey’s first-quarter data shows that 165 hedge funds were bullish on Alphabet Inc. (NASDAQ:GOOG), compared to 166 in the previous quarter. The largest stakeholder is Ken Fisher’s Fisher Asset Management, holding 46.3 million shares valued at $6.99 billion.
On April 25, Alphabet Inc. (NASDAQ:GOOG)’s chief executive Sundar Pichai announced that YouTube and Google’s cloud business are expected to achieve a combined annual run rate of over $100 billion by the end of 2024, highlighting significant revenue sources for the search giant. YouTube alone reported $8.1 billion in ad sales for the first quarter ending March 31, marking its highest Q1 revenue to date, up 21% year-over-year from $6.7 billion in Q1 2023.
Additionally, Bank of America’s industry checks in the search engine market recently revealed that Alphabet Inc. (NASDAQ:GOOG) remains the market leader with a dominant 95% share, while Bing’s search holds just 0.7%.
Lakehouse Global Growth Fund stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its 2024 investor letter:
“Alphabet Inc. (NASDAQ:GOOG) delivered a strong quarterly result that came in well ahead of analysts’ expectations. Revenue grew 15.4% (16.0% constant currency) to $80.5 billion and operating income grew 46.0% to $25.5 billion. Revenue growth accelerated across Search, YouTube Ads, and Google Cloud, all whilst the company delivered its highest operating margin since 2021 – showing meaningful progress in the company’s efforts to durably re-work their cost structure. On the Generative AI front, management emphasised the company’s infrastructure advantages including 5th generation TPUs(chips developed by Google specifically for AI training and inference), high performance data centre architecture, and AI models that are 100x more efficient versus 18 months ago. Overall, we believe that Alphabet is well placed for the AI opportunity ahead and still has significant latent earnings power. When combined with a relatively undemanding valuation of 21x forward net profit and over $100 billion of cash on the balance sheet, it’s not hard to see why we remain positive on the range of outcomes in the years ahead.”
Overall GOOG ranks 4th on our list of the best edge computing stocks to buy. You can visit Edge Computing Market Size and 7 Best Stocks To Buy to see the other edge computing stocks that are on hedge funds’ radar. While we acknowledge the potential of GOOG as an investment, 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 as promising as GOOG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
