We recently put together an estimate of the edge computing market size and a list of the seven best stocks to buy, and in this article we’ll take a look at how Amazon.com, Inc. (NASDAQ:AMZN) 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).
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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 diversified portfolio that includes e-commerce, cloud computing through 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 March 2024 quarter research revealed that 302 of the 919 hedge funds tracked hold shares in Amazon.com, Inc. (NASDAQ:AMZN). The largest hedge fund investor is Ken Fisher’s Fisher Asset Management, with its holdings worth $7.67 billion.
On June 14, JP Morgan reaffirmed its Overweight rating on Amazon.com, Inc. (NASDAQ:AMZN) with a target price of $240. This stance is based on a comprehensive analysis of the US e-commerce landscape, including category penetration and Amazon’s market share. Research suggests that Amazon could overtake Walmart as the largest US retailer by 2024, and e-commerce penetration could exceed 40% in the long term.
Additionally, Amazon.com, Inc. (NASDAQ:AMZN) has emerged as an AI powerhouse, driven by its AWS business, which achieved operating margins of over 37% in the first quarter. AWS operating margins have been above 30% for the past five consecutive quarters. Additionally, Amazon’s first-quarter revenue grew 12.5% year over year, and adjusted EPS increased more than threefold.
In its Q1 2024 investor letter, Vulcan Value Partners said the following about Amazon.com, Inc. (NASDAQ:AMZN):
“Amazon.com, Inc. (NASDAQ:AMZN) is a world-class, leading company with strong secular tailwinds, including e-commerce penetration, digital advertising growth, and the shift to the cloud. Amazon reported strong financial results during the quarter, with losses in its core retail business narrowing significantly. Amazon saw its cost of serving per unit decrease for the first time since 2018 as its recent localization efforts continued to bear fruit.”
Overall, AMZN ranks #1 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 7 Best Stocks to Buy. While we acknowledge AMZN’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 AI stocks that are as promising as AMZN but trade for less than 5x 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.
