In this article, we will discuss the Edge Computing Market and 7 Best Stocks to Buy.
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.
A computer programmer developing a software application for high-performance computing.
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).
Edge Computing Market Size and 7 Best Stocks To Buy
7. Accenture plc (NYSE:ACN)
Number of Hedge Fund Holders: 57
Accenture plc (NYSE:ACN) is an Ireland-based information technology company that enables businesses to digitally transform their operations by offering a wide range of services and solutions, including strategy, consulting, digital, and technology. The “Accenture One Edge Platform” is a unified asset platform that acts as Accenture plc (NYSE:ACN)’s approach to providing a centrally manageable Cloud-Edge-IoT computing continuum.
According to Insider Monkey’s first-quarter database, 57 hedge funds held long positions in Accenture plc (NYSE:ACN), down slightly from the 58 in the previous quarter. GuardCap Asset Management is the largest stakeholder in the company, with 1.75 million shares valued at $609.7 million.
ClearBridge International Growth EAFE Strategy stated the following regarding Accenture plc (NYSE:ACN) in its fourth quarter 2023 investor letter:
“Another welcome change has been the recognition of generative artificial intelligence (AI) opportunities for companies outside the U.S. While our IT holdings trailed their mega cap U.S. counterparts for most of the year, semiconductor equipment makers ASML and Tokyo Electron, which we consider enablers of AI, as well as enterprise software maker SAP and IT consultant Accenture plc (NYSE:ACN), which we see as facilitators of AI adoption in new product lines and/or enhanced business models, rose strongly in the quarter. These companies are rolling out new, AI-enhanced products at higher prices which should positively impact earnings in the near term.”
Not everyone is bullish on Accenture though. Deutsche Bank recently downgraded the consulting company. Deutsche Bank noted that Accenture had been a prominent share gainer in the IT services industry for most of its history. However, the bank expressed concern that the company’s recent performance, particularly the estimated 2.5% decline in organic revenues during fiscal Q2, indicated a shift in its market position. This shift led Deutsche Bank to downgrade Accenture’s rating from Buy to Hold and lower its price target to $295 from $409.
6. Arista Networks, Inc. (NYSE:ANET)
Number of Hedge Fund Holders: 69
Arista Networks, Inc. (NYSE:ANET) is an American computer networking company headquartered in Santa Clara, California. The company specializes in designing and selling multilayer network switches that enable software-defined networking for large-scale data centers, cloud computing, high-performance computing, and high-frequency trading environments.
In a recent report, Samik Chatterjee from J.P. Morgan maintained a Buy rating on Arista Networks, Inc. (NYSE:ANET), with a price target of $335. Additionally, Arista Networks, Inc. (NYSE:ANET) received a Buy rating from Barclays’ Tim Long in a report issued on May 9.
According to Insider Monkey’s first-quarter database, 69 hedge funds were bullish on Arista Networks, Inc. (NYSE:ANET), an increase from 64 funds in the previous quarter. Steve Cohen’s Point72 Asset Management was one of the largest stakeholders in the company, holding 987,926 shares valued at $286.47 million.
In the fast-evolving landscape of technology, Arista Networks (ANET) stands out as a compelling investment opportunity. Specializing in datacenter hardware and cloud networking solutions, ANET has been making waves in the industry for its innovative approach and consistent financial performance. The company is positioned to expand its presence in the Ethernet switches market, which is valued at $45 billion. Arista’s switches are highlighted for their efficiency in interfacing with advanced chips compared to competitors like Cisco. One of the key indicators of ANET’s strength lies in its impressive financial performance. The company has consistently surpassed market expectations, with better-than-expected quarterly results becoming a norm. Over the last four releases, ANET has exceeded consensus EPS estimates by an average of 15%, demonstrating its robust operational efficiency and strategic execution.
Moreover, Arista Networks has been riding the wave of the AI frenzy, further bolstering its growth trajectory. The company’s recent quarterly results underscore this momentum, with sales soaring to $1.5 billion in Q1, marking a remarkable 16% increase compared to the previous year. This stellar sales growth, coupled with the company’s ability to consistently deliver strong earnings, reflects ANET’s resilience and agility in navigating the dynamic tech landscape. The company recently raised its revenue growth guidance for the current fiscal year (FY24) to a range of 12% – 14%, signaling confidence in its future prospects. This upward revision sent ANET shares soaring post-earnings, further solidifying investor sentiment in the company’s growth potential.
The company announced a new $1.2 billion stock repurchase plan, highlighting its confidence in generating sustainable returns for investors.
5. Intel Corporation (NASDAQ:INTC)
Number of Hedge Fund Holders: 77
Intel Corporation (NASDAQ:INTC) is an American multinational corporation and technology company headquartered in Santa Clara, California. It is one of the world’s leading semiconductor chip manufacturers by revenue and a significant contributor to the advancement of the x86 series of instruction sets, widely used in personal computers. Additionally, the company offers edge computing solutions, including the Intel Smart Edge Open, an open-source Mobile Edge Computing (MEC) toolkit designed to facilitate the efficient and high-performance deployment of edge platforms for applications and network functions.
According to Insider Monkey’s first-quarter database, 77 hedge funds held long positions in Intel Corporation (NASDAQ:INTC), down from 86 in the preceding quarter. William B. Gray’s Orbis Investment Management is the largest stakeholder in the company, with 12.56 million shares valued at $554.8 million.
With that said, the current market climate has presented a new set of challenges for the chipmaker. Recently, the US government halted Intel Corporation (NASDAQ:INTC) from selling processors to China’s Huawei, which was followed by a Stifel analyst’s note lowering the company’s share price target from $45 to $34 while maintaining a Hold rating. Intel Corporation (NASDAQ:INTC) confirmed the license revocation amid a complex global trade environment. Despite this setback, the company has maintained its second-quarter revenue forecast between $12.5 billion and $13.5 billion, though it now expects revenue to fall below the midpoint of this range.
4. 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.”
3. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 186
NVIDIA Corporation (NASDAQ:NVDA) is an American multinational technology company incorporated in Delaware and headquartered in Santa Clara, California. Renowned for its expertise in developing integrated circuits, the company’s products are used in various devices, including electronic game consoles and personal computers (PCs). The NVIDIA EGX platform notably extends the power of accelerated computing from data centers to edge locations, providing a range of optimized hardware components along with user-friendly deployment, applications, and management software.
According to Insider Monkey’s first-quarter database, 186 hedge funds held stakes in NVIDIA Corporation (NASDAQ:NVDA), up from 173 in the previous quarter. One of the prominent stakeholders is Rajiv Jain’s GQG Partners, with nearly 13.36 million shares valued at $12.07 billion.
NVIDIA Corporation (NASDAQ:NVDA) recently shook the market again as one of the world’s largest tech ETFs is on the brink of a significant shift due to the chipmaker surpassing Apple Inc. in market size. Due to diversification rules, the $67 billion Technology Select Sector SPDR Fund has held significantly fewer NVDA shares for months, even as the AI giant’s value has soared. Currently, NVIDIA Corporation (NASDAQ:NVDA) accounts for roughly 6% of the fund’s assets, compared to 21% in the S&P 500 Information Technology Index, causing XLK to underperform significantly this year. With the company’s recent surge past Apple in value, its representation in XLK could see a substantial increase during the ETF’s quarterly rebalance at the end of this month.
RiverPark Large Growth Fund stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its first quarter 2024 investor letter:
“NVIDIA Corporation (NASDAQ:NVDA): NVDA shares were our top contributor in the quarter following blowout 4Q results and 1Q guidance driven by strong data center sales. The company reported quarterly revenue of $22.1 billion, up 265% year-over-year, and EPS in the quarter of $5.16, up 487% year-over-year and 12% ahead of expectations. Revenue guidance for 1Q of $24 billion was 8% above very high expectations. The artificial intelligence arms race kicked-off by ChatGPT and Alphabet’s Bard, among others, has generated tremendous demand for Nvidia’s next generation graphic processors.
NVDA is the leading designer of graphics processing units (GPU’s) required for powerful computer processing. Over the past 20 years, the company has evolved through innovation and adaptation from a predominantly gaming-focused chip vendor to one of the largest semiconductor/software vendors in the world. Over the past decade, the company has grown revenue at a compound annual rate of over 20% while expanding operating margins and, through its asset light business model, producing ever increasing amounts of free cash flow. Following recent results, Jensen Huang, founder and CEO of NVIDIA stated in the company’s press release, “a trillion dollars of installed global data center infrastructure will transition from general purpose to accelerated computing as companies race to apply generative AI into every product, service and business process.”
2. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 293
Microsoft Corporation (NASDAQ:MSFT) is an American multinational technology company based in Redmond, Washington. The company is best known for its software products, including the Windows operating systems, the Microsoft 365 suite of productivity applications, and the Edge web browser. Microsoft Azure has rapidly gained prominence in the realm of edge computing by supporting edge initiatives in both hardware and software.
Among the hedge funds tracked by Insider Monkey, Texas-based Fisher Asset Management is a notable shareholder in Microsoft Corporation (NASDAQ:MSFT), holding 25.9 million shares valued at over $10.9 billion.
New Street Research recently initiated coverage of Microsoft Corporation (NASDAQ:MSFT) with a Buy rating, stating that the company is well positioned to grow profits in the “low teens for years to come,” even if the AI revolution doesn’t fully materialize. They set a price target of $570 on the stock. Additionally, on June 14, Tigress Financial Partners updated their outlook on Microsoft Corporation (NASDAQ:MSFT), raising the 12-month price target to $550 and maintaining a Buy rating all the while emphasizing the company’s strategic position to lead the AI revolution, which has been a key driver of its financial performance.
In its recent earnings report, Microsoft Corporation (NASDAQ:MSFT) posted a 17% year-over-year increase in quarterly revenue, reaching $61.9 billion. This growth was driven by strong performances across various segments, including a 23% increase in cloud revenue, totaling $35.1 billion. The expansion of Microsoft Corporation (NASDAQ:MSFT)’s cloud services, particularly Azure, played a central role in this success, supported by significant customer migration and a growing number of large Azure deals.
Baron Fifth Avenue Growth Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its first quarter 2024 investor letter:
“Our second largest purchase during the quarter was the software platform, Microsoft Corporation (NASDAQ:MSFT), which we continued to add to, after initiating a position in the fourth quarter of 2023. Microsoft continues to report strong quarterly results, with revenue growth of 16% year-over-year in constant currency thanks to better-than-expected demand in its intelligent cloud segment, which saw revenue growth of 19% year-over-year, driven by Azure growth of 28% with AI contributing 6pts to growth compared with 3pts in the prior quarter. While the adoption of GenAI remains in its early stages, Microsoft has disclosed positive initial data points with 53,000 Azure AI customers as of its December quarter up from 18,000 in the prior quarter, 1.3 million paid GitHub Copilot subscribers (up 30% sequentially) and more than 230,000 organizations who have used AI capabilities in the power platform (up 80% sequentially). Management also noted that large cloud optimizations that started a year or so ago have largely finished. Profitability also continues to be strong with 44% non-GAAP operating margins, which was 120bps better than expected.”
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 302
Amazon.com, Inc. (NASDAQ:AMZN) is a leading American multinational technology company with a diverse portfolio, including e-commerce, cloud computing via Amazon Web Services (AWS), online advertising, digital streaming, and artificial intelligence. Notably, AWS offers edge computing services as part of its cloud solutions.
Insider Monkey’s research for the March quarter of 2024 revealed that 302 out of the 919 hedge funds tracked held stakes in Amazon.com, Inc. (NASDAQ:AMZN). The largest hedge fund investor was Ken Fisher’s Fisher Asset Management, with a stake valued at $7.67 billion.
On June 14, JPMorgan reiterated its Overweight rating on Amazon.com, Inc. (NASDAQ:AMZN) with a price target of $240. This stance followed a comprehensive analysis of the U.S. e-commerce landscape, including category penetration and Amazon’s market share. The research indicates that Amazon is on track to surpass Walmart as the largest U.S. retailer by 2024, with e-commerce penetration potentially exceeding 40% in the long term.
Furthermore, Amazon.com, Inc. (NASDAQ:AMZN) is emerging as a powerhouse in AI, driven by its AWS business, which achieved operating margins of over 37% in the first quarter. AWS operating margins have exceeded 30% for the past five consecutive quarters. Additionally, Amazon’s first-quarter revenue increased by 12.5% year-over-year, and its adjusted EPS more than tripled.
Vulcan Value Partners stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its first quarter 2024 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN) is a dominant, world class company with powerful secular tailwinds in place including its ecommerce penetration, digital advertising growth, and the cloud transition. Amazon reported strong results during the quarter. Losses in the Core Retail business significantly narrowed. Amazon reduced its cost to serve on a per unit basis for the first time since 2018 as the company’s recent regionalization efforts continue to bear fruit.”
While we acknowledge the potential of edge computing companies to grow, 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 AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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