We recently put together a list of the edge computing market size and the seven best stocks to buy, and in this article we’ll look at how NVIDIA Corporation (NASDAQ:NVDA) stands relative to other edge computing stocks.
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.
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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.
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).
Close-up of a colorful high-end graphics card plugged into a gaming computer.
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. Known for its expertise in developing integrated circuits, the company’s products are used in a variety of devices, including electronic gaming consoles and personal computers (PCs). The NVIDIA EGX platform extends the power of accelerated computing from the data center to edge locations, delivering a range of optimized hardware components along with user-friendly deployment, application, and management software.
According to Insider Monkey’s Q1 database, there are 186 hedge funds holding shares in NVIDIA Corporation (NASDAQ:NVDA), up from 173 in the previous quarter. One of the major shareholders is Rajiv Jain’s GQG Partners, with approximately 13.36 million shares worth $12.07 billion.
NVIDIA Corporation (NASDAQ:NVDA) recently shook up the market once again as one of the world’s largest technology ETFs is on the brink of a major change after it surpassed Apple Inc. in market cap. Due to diversification rules, the $67 billion Technology Select Sector SPDR Fund has been heavily reducing NVDA shares for months, even as the AI giant’s value has soared. Currently, NVIDIA Corporation (NASDAQ:NVDA) represents about 6% of the fund’s assets, which is low compared to 21% for the S&P 500 Information Technology Index, and XLK has significantly underperformed this year. The company’s recent surge in value could lead to a significant increase in its weighting in XLK when the ETF’s quarterly rebalancing occurs later this month.
In its Q1 2024 investor letter, RiverPark Large Growth Fund said the following about NVIDIA Corporation (NASDAQ:NVDA):
“NVIDIA Corporation (NASDAQ:NVDA): NVDA stock was the largest quarterly contributor on the back of strong fourth-quarter results in data center sales and strong first-quarter guidance. The company posted quarterly revenue of $22.1 billion, up 265% year over year, and EPS of $5.16, up 487% year over year and 12% above expectations. First-quarter revenue guidance of $24 billion was 8% above sky-high expectations. The artificial intelligence arms race started by ChatGPT, Alphabet’s Bard and others is spurring demand for Nvidia’s next-generation graphics processors.
NVDA is a leading designer of graphics processing units (GPUs) required for powerful computing. Over the past two decades, the company has evolved through innovation and adaptation from a primarily gaming-focused chip vendor to one of the world’s largest semiconductor and software vendors. Over the past decade, the company has grown revenue by more than 20% annually, expanded operating margins, and consistently increased free cash flow through an asset-light business model. Following the company’s recent results, NVIDIA founder and CEO Jensen Huang said in a company press release: “As companies race to apply generative AI to every product, service and business process, $1 trillion of installed global data center infrastructure will shift from general-purpose computing to accelerated computing.”
Overall, NVDA ranks third on our list of best edge computing stocks to buy. You can see other edge computing stocks that hedge funds are watching by visiting our Edge Computing market size and the 7 best stocks to buy. While we recognize NVDA’s potential as an investment, we believe AI stocks have a better chance of delivering higher returns in a shorter time frame. If you’re looking for an AI stock that’s as promising as NVDA but trades for less than five times its earnings, check out our report on the cheapest AI stocks.
Read next: Analyst sees new $25 billion ‘opportunity’ in NVIDIA, Jim Cramer recommended these 10 stocks in June.
Disclosures: None. This article was originally published on Insider Monkey.
