In this article, we will discuss the edge computing market and the seven best stocks to buy.
What is Edge Computing?
The information technology sector has consistently outperformed investors and analysts’ expectations in 2023, and the trend appears set to continue this year. This stellar performance is largely due to major advancements such as the rise of artificial intelligence (AI) and generative AI, which has propelled the price of technology stocks to unprecedented highs. Of course, AI isn’t the only thing revolutionizing the technology sector. Edge computing is another attractive area for growth and investment. Edge computing, also known as mobile edge computing (MEC) or multi-access edge computing, focuses on moving computing power closer to where data is generated, rather than relying on centralized cloud-based systems. Simply put, edge computing moves some of the storage and computing capabilities from a central data center to a location closer to the data source.
Edge solutions keep computing power closer to the user, device or data source, delivering benefits such as lower latency, increased bandwidth, local device processing and data offload. For example, a smart speaker performs minimal computational work and sends requests to a server owned by the provider. Edge computing allows a smart speaker to process user requests entirely on the device itself. Gartner states in its March 2024 Market Guide for Edge Computing:
“By placing data, data management capabilities and analytics workloads at the optimal point all the way to the endpoint device, enterprises can enable more real-time use cases. Additionally, the flexibility to move data management workloads up and down the continuum from centralized data centers to cloud-to-edge devices allows for further resource optimization.”
Edge Computing with the Internet of Things and Artificial Intelligence
The automotive industry is a good example of the rapid advancements driven by the integration of edge computing and artificial intelligence (AI) in recent years. As vehicles evolve to incorporate self-driving capabilities, these technologies have become essential for effective decision-making and real-time responses. Tesla, for example, is leveraging vast amounts of data on real-world driving to refine its AI algorithms for self-driving. Rolling out the EV maker’s Full Self-Driving (FSD) beta software to more drivers will highlight performance in real-world conditions, and the vast amounts of visual data collected during these drives will enhance the company’s AI learning process.
Additionally, the emergence and deployment of 5G, the fifth generation of cellular network technology that offers significantly higher bandwidth, is accelerating the growth of the Internet of Things (IoT) and encouraging widespread adoption of edge computing. 5G networks are expected to drive data volumes exponentially, enabling ultrafast speeds and an increasing number of connected devices. Forecasts suggest that by 2025, every connected user will interact with digital data at least once every 18 seconds. This is primarily due to the fact that billions of IoT devices are projected to generate more than 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 is valued at $15.96 billion in 2023 and is projected to grow from $21.41 billion in 2024 to $216.76 billion in 2032, a compound annual growth rate of 33.6% during the forecast period. This growth is driven by the increasing adoption of edge devices, ranging from IoT devices such as mobile POS kiosks and smart cameras to computing infrastructure that enables faster, real-time data analytics at the source. Meanwhile, PwC predicts that the global market for edge data centers will grow from $4 billion in 2017 to $13.5 billion this year, nearly tripling. This expansion is driven by the potential of locally located data centers to reduce latency, manage intermittent connectivity, and facilitate data storage and computation closer 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 who develops software applications for high performance computing.
Our Methodology
To compile our list of the best edge computing stocks, we first combed through ETF holdings and online rankings to come up with a preliminary list of 15 stocks, then scanned Insider Monkey’s Q1 database, which tracks 920 elite money managers, to select the top 7 stocks most highly held by hedge funds.
Why are we interested in hedge fund concentrated stocks? The reason is simple: our research shows that you can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter strategy selects 14 small and large stocks each quarter, and has returned 275% since May 2014, beating the benchmark by 150 percentage points (more details here).
Edge Computing Market Size and 7 Best Stocks to Buy
7. Accenture (NYSE:ACN)
Number of hedge fund holders: 57
Accenture plc (NYSE:ACN) is an Ireland-based information technology company that helps organizations digitally transform their operations by providing a broad range of services and solutions, including strategy, consulting, digital and technology. The “Accenture One Edge Platform” is an integrated asset platform that serves as Accenture plc’s (NYSE:ACN) approach to delivering a centrally managed continuum of cloud, edge and IoT computing.
According to Insider Monkey’s Q1 database, 57 hedge funds have long positions in Accenture plc (NYSE:ACN), down slightly from 58 in the previous quarter. GuardCap Asset Management is the company’s largest shareholder, with 1.75 million shares worth $609.7 million.
In its fourth quarter 2023 investor letter, ClearBridge International Growth EAFE Strategy said the following about Accenture plc (NYSE: ACN):
“Recognition of the opportunity in generative artificial intelligence (AI) for companies outside the US has also been a welcome change. Our IT holdings have lagged US mega-caps throughout the year, but we’ve seen strong gains in the quarter with semiconductor equipment makers ASML and Tokyo Electron, which we see as drivers of AI, as well as enterprise software maker SAP and IT consultancy Accenture (NYSE:ACN), which we see as catalysts for AI adoption in new product lines and enhanced business models. These companies are rolling out new AI-enhanced products at higher prices, which should have a positive impact on revenue in the near term.”
But not everyone is bullish on Accenture. Deutsche Bank recently downgraded its rating on the consulting firm. Deutsche Bank noted that Accenture has achieved impressive market share growth in the IT services industry since its inception. But the bank expressed concern that the company’s recent performance, particularly an estimated 2.5% decline in organic revenue in the second quarter, signals a shift in the company’s market position. In response to the change, Deutsche Bank downgraded Accenture to “hold” from “buy” and lowered its price target to $295 from $409.
6. Arista Networks (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 the design and sale of multi-layer network switches that enable software-defined networking for large data centers, cloud computing, high-performance computing and high-frequency trading environments.
In a recent report, Samik Chatterjee of JP Morgan maintained a Buy rating on Arista Networks, Inc. (NYSE:ANET) with a target price of $335. Additionally, Arista Networks, Inc. (NYSE:ANET) received a Buy rating from Tim Long of Barclays in a report issued on May 9th.
According to Insider Monkey’s Q1 database, 69 hedge funds are bullish on Arista Networks (NYSE:ANET), up from 64 funds in the previous quarter. Steve Cohen’s Point72 Asset Management is one of the company’s largest shareholders, holding 987,926 shares worth $286.47 million.
In the rapidly evolving technology industry, Arista Networks (ANET) stands out as an attractive investment opportunity. Specializing in data center hardware and cloud networking solutions, ANET is taking the industry by storm with its innovative approach and consistent financial performance. The company is positioned to expand its presence in the Ethernet switch market, which is valued at $45 billion. Arista’s switches are noted for their efficiency in interfacing with advanced chips compared to competitors such as Cisco. One of the key indicators of ANET’s strength is its strong financial performance. The company has consistently exceeded market expectations, making better-than-expected quarterly performance the norm. Over the past four releases, ANET has surpassed consensus EPS estimates by an average of 15%, demonstrating its solid operational efficiency and strategy execution.
Moreover, Arista Networks is riding the wave of the AI boom to further strengthen its growth trajectory. The company’s recent quarterly financial results underscore this momentum, with first-quarter revenue surging to $1.5 billion, up an astounding 16% year-over-year. This impressive revenue growth, coupled with the company’s ability to consistently deliver high profits, reflects ANET’s resilience and agility in navigating a dynamic technology environment. The company recently raised its revenue growth guidance for the current fiscal year (FY24) to the range of 12%-14%, signaling confidence in its future prospects. This upward revision caused ANET’s shares to soar after the earnings release, further solidifying investor sentiment on the company’s growth potential.
The company announced a new $1.2 billion share repurchase plan, underscoring its confidence in delivering sustainable returns to investors.
