Edge Computing Market Size and Best Stocks To Buy
In this article, we discuss the 10 best edge computing stocks to buy. If you want to skip our discussion on the edge computing market, head over to 5 Best Edge Computing Stocks To Buy.
What is 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 simple terms, edge computing involves relocating a part of storage and computing capabilities from the central data center to close proximity of data sources. Rather than sending raw data to a central facility for analysis, computation is performed at the location where the data is generated and only the computed results, like real-time business insights or equipment maintenance predictions, are transmitted back to the central data center. Devices such as smart speakers, watches, and phones, which engage in edge computing by locally collecting and processing data, are already a part of our daily lives.
Contrary to what some may think, edge computing doesn't need a separate "edge network." It can work on single devices or routers. If a separate network is used, 5G is important, offering fast wireless connections. This enables cool applications like autonomous drones, remote surgeries, and smart cities. The edge network is useful when on-site computing is too expensive or complex, but fast responses are needed, and the cloud is too distant. Edge networks enable local computation, allowing devices at the edge (like sensors, cameras, or IoT devices) to process data and make decisions without the need to send all information to a centralized cloud for analysis.
The Intelligent Edge aims to provide faster, more reliable, and efficient processing for quicker decision-making and reduced dependence on centralized cloud systems, which may face issues like latency and bandwidth. However, deploying and managing edge computing infrastructures pose challenges due to technological complexity, overwhelming data volume, and interoperability issues. Gartner predicts that by 2026, at least 50% of edge computing deployments will involve machine learning. AI algorithms are well-suited for the data-rich environments of edge computing, enabling quick and accurate analysis of vast data sets. Integrating AI allows edge devices to independently process and act on collected data without constant communication with a central server. This integration enhances decision-making speed, crucial for applications like real-time inventory management or industrial equipment calibration.
Edge Computing Market Size and Key Trends
According to Expert Market Research, the global edge computing market is anticipated to grow significantly from $15.54 billion in 2023 to $147.38 billion by 2032, reflecting a compound annual growth rate (CAGR) of 28.4% during the forecast period of 2024-2032. This growth is attributed to the rise of autonomous vehicles, connected car networks, and the demand for lightweight frameworks and applications to enhance edge computing efficiency, creating numerous market opportunities. PwC expects the global market for edge data centers to nearly triple, reaching $13.5 billion in 2024 from $4 billion in 2017. This growth is driven by the potential of locally located data centers to reduce latency, address intermittent connections, and enable data storage and computation in close proximity to end-users. Edge data centers are growing in popularity due to several key trends. The introduction of 5G is a big factor, as these smaller decentralized centers support high-density 5G applications with low costs and latency, especially in smart-city scenarios. Similarly, the increasing use of IoT devices requires quick data processing at the edge to handle the growing amount of information from sensors in homes and industries. Moreover, the adoption of software-defined networking and virtualization technologies allows software to replace expensive hardware in data centers. Lastly, the demand for video streaming and AR/VR is met by these cost-effective edge data centers, reducing latency and providing good performance for users.
Read also: Top 15 Edge Computing Companies in the World
What’s New in the Edge Computing Market?
On January 5, 2024, International Business Machines Corporation (NYSE:IBM) disclosed that it is partnering with American Tower Corporation (NYSE:AMT), a global digital infrastructure provider, to accelerate the deployment of a hybrid, multi-cloud computing platform at the edge. This collaboration aims to expand American Tower's Access Edge Data Center ecosystem by integrating IBM Hybrid Cloud capabilities and Red Hat OpenShift. The goal is to help clients address evolving customer requirements and expectations in digital transformation, incorporating technologies like IoT, 5G, AI, and network automation. IBM plans to provide American Tower with a hybrid cloud platform, facilitating the creation of an edge cloud at American Tower's distributed real estate locations.
Similarly, on February 5, Ernst & Young announced that it has launched the EY Edge Technologies Lab, aiming to forefront edge ecosystem technologies in digital transformation. This initiative focuses on creating real-time, industry-specific use cases and prototypes for edge-centric solutions, integrating technology seamlessly into business operations. Leveraging EY.ai, a platform combining business experience with AI technology, the Lab demonstrates the advantages of embedding AI at the edge to optimize speed, performance, security, reliability, and resiliency for businesses. The Lab uses Dell NativeEdge and collaborates with Microsoft, PTC, GE Digital, Snowflake, and others to enhance business operations and leverage edge technology efficiently.
Some of the best edge computing market leaders to invest in include Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and NVIDIA Corporation (NASDAQ:NVDA).
Our Methodology
For a list of the best edge computing market leaders, we scanned Insider Monkey’s fourth quarter database of 933 hedge funds and picked 10 companies operating in the edge computing software and hardware services industry with the highest number of hedge funds. These are the best edge computing market leaders to invest in according to hedge funds. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here).
A futuristic datacenter with servers and high-tech equipment, signifying the company's cutting-edge digital technology.
Edge Computing Market Size and Best Stocks To Buy
10. Cloudflare, Inc. (NYSE:NET)
Number of Hedge Fund Holders: 44
Ranking 10th on our list of edge computing market leaders is Cloudflare, Inc. (NYSE:NET). It is a global cloud services provider offering cloud-based security solutions for different platforms, web and application security products, and performance optimization solutions such as content delivery and load balancing. The company also provides a Secure Access Service Edge (SASE) platform called Cloudflare One, along with network services for connectivity, security, and performance.
In Q4 2023, Cloudflare, Inc. (NYSE:NET) reported adjusted earnings per share of 15 cents, surpassing analysts' expectations of 12 cents. The company's revenue for the quarter was $362.5 million, reflecting a 32% year-over-year increase and beating the anticipated $353 million. Cloudflare achieved record operating cash flow at $85.4 million, equivalent to 24% of total revenue, and set a quarterly free cash flow record at $50.7 million, representing 14% of total revenue.
According to Insider Monkey’s fourth quarter database, 44 hedge funds were long Cloudflare, Inc. (NYSE:NET), compared to 37 funds in the prior quarter. John Overdeck and David Siegel’s Two Sigma Advisors is the largest stakeholder of the company, with 2 million shares worth $165.4 million.
Like Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and NVIDIA Corporation (NASDAQ:NVDA), Cloudflare, Inc. (NYSE:NET) is one of the edge computing market leaders to watch.
Baron Fifth Avenue Growth Fund stated the following regarding Cloudflare, Inc. (NYSE:NET) in its fourth quarter 2023 investor letter:
“Most of our portfolio companies have seen stabilization and modest improvements in short-term business fundamentals as the year progressed. More importantly in our view, many have been able to drive significant improvement in long-term Key Performance Indicators (KPIs) such as share gains, meaningful expansion of their total addressable market, and improvement in unit economics. These KPIs are significantly more important in driving the intrinsic values of our businesses, which we believe have increased noticeably during 2023. In the meantime, disruptive changes that we expect will benefit many of our businesses have also continued to pick up steam. Some examples include: ? Another example is the leading cloud networking and cybersecurity solution provider, Cloudflare, Inc. (NYSE:NET), who described market share gains and customers consolidating from multiple point solutions to Cloudflare’s platform: “And so we’re the one vendor that is able to give people that vendor consolidation, that single pane of glass… that comes through in a lot of customer examples…. People want to buy the entire Cloudflare platform. They want to protect their entire business with that, and that’s driving more interest in both our network security, as well as our Zero Trust products.”
9. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 50
International Business Machines Corporation (NYSE:IBM) ranks 9th on our list of edge computing market leaders. It provides integrated solutions and services globally through its Software, Consulting, Infrastructure, and Financing segments. IBM focuses on hybrid cloud and AI platforms, consulting for different industries, and offers on-premises and cloud-based infrastructure solutions. International Business Machines Corporation (NYSE:IBM) is one of the top edge computing market leaders.
On January 30, International Business Machines Corporation (NYSE:IBM) declared a quarterly dividend of $1.66 per share, in line with previous. The dividend is payable on March 9, to shareholders on record as of February 9.
According to Insider Monkey’s fourth quarter database, 50 hedge funds were bullish on International Business Machines Corporation (NYSE:IBM), compared to 53 funds in the earlier quarter. Ken Griffin’s Citadel Investment Group is the leading stakeholder of the company, with 1.45 million shares worth $238.5 million.
Diamond Hill Long-Short Fund made the following comment about International Business Machines Corporation (NYSE:IBM) in its Q4 2022 investor letter:
“New positions initiated in Q4 included shorts International Business Machines Corporation (NYSE:IBM), Acushnet Holdings (GOLF) and elf Beauty (ELF). Since diversified information technology company IBM’s 2019 acquisition of Red Hat, the company has aggressively pursued a hybrid cloud strategy. Though IBM and its new management team have made solid progress on this pivot, we believe the company still meaningfully lags the cloud hyperscalers and other cloud-native companies. Management has also laid out aggressive long-term targets for revenue growth and free cash flow, both of which we believe the company will struggle to achieve as it faces intense competition in its hybrid cloud business and structural headwinds in the company’s legacy businesses.”
8. Hewlett Packard Enterprise Company (NYSE:HPE)
Number of Hedge Fund Holders: 50
Hewlett Packard Enterprise Company (NYSE:HPE) provides data solutions globally through Compute, HPC & AI, Storage, Intelligent Edge, Financial Services, and Corporate Investments segments. Their offerings include servers, storage products, edge systems, networking solutions, and related services. Hewlett Packard Enterprise Company (NYSE:HPE) ranks 8th on our list of the edge computing market leaders.
On February 27, Hewlett Packard Enterprise Company (NYSE:HPE) CEO Antonio Neri mentioned that the company is manufacturing some of its servers in the Middle East to enhance supply chain resilience and meet growing demand. The decision is not solely driven by geopolitical factors but also aims to address potential disruptions caused by natural disasters.
According to Insider Monkey’s fourth quarter database, 50 hedge funds were bullish on Hewlett Packard Enterprise Company (NYSE:HPE), compared to 47 funds in the prior quarter. Cliff Asness’ AQR Capital Management is the largest stakeholder of the company, with 14.6 million shares worth $248 million.
7. Accenture plc (NYSE:ACN)
Number of Hedge Fund Holders: 58
Accenture plc (NYSE:ACN) is next on our list of the edge computing market leaders. It is a global professional services company that offers application services, intelligent automation, software engineering, data and analytics, metaverse, sustainability, change management, HR transformation, digital commerce, infrastructure services, technology consulting, engineering and R&D digitization, business process outsourcing, and other technology-related services. Accenture plc (NYSE:ACN) is one of the top edge computing market leaders.
On December 19, Accenture plc (NYSE:ACN) reported financial results for the first quarter of fiscal 2024 ending November 30, 2023. The company posted a Non-GAAP EPS of $3.27, beating market estimates by $0.14. The revenue of $16.2 billion was in-line with Street consensus.
According to Insider Monkey’s fourth quarter database, 58 hedge funds were long Accenture plc (NYSE:ACN), compared to 55 funds in the prior quarter. GuardCap Asset Management is the largest stakeholder of the company, with 1.74 million shares worth $610.6 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.”
6. Arista Networks, Inc. (NYSE:ANET)
Number of Hedge Fund Holders: 64
Arista Networks, Inc. (NYSE:ANET) specializes in developing, marketing, and selling data-driven networking solutions for data center and cloud networking, including AI-driven ethernet switching platforms, campus wired and wireless products, and routing systems. The company serves diverse industries such as internet companies, service providers, financial services, government agencies, media, and telecommunications. Arista Networks, Inc. (NYSE:ANET) ranks 6th on our list of edge computing market leaders
On February 12, Arista Networks, Inc. (NYSE:ANET) reported Q4 non-GAAP earnings per share of $2.08, exceeding Wall Street estimates by $0.37. The revenue increased 20.3% year-over-year to $1.54 billion, in-line with market consensus.
According to Insider Monkey’s fourth quarter database, 64 hedge funds were bullish on Arista Networks, Inc. (NYSE:ANET), compared to 59 funds in the prior quarter. Steve Cohen’s Point72 Asset Management is the biggest stakeholder of the company, with 833,408 shares worth $196.2 million.
In addition to Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and NVIDIA Corporation (NASDAQ:NVDA), Arista Networks, Inc. (NYSE:ANET) is one of the notable edge computing market leaders.
Giverny Capital Asset Management stated the following regarding Arista Networks, Inc. (NYSE:ANET) in its fourth quarter 2023 investor letter:
“We did a bit of portfolio sculpting during the year, with mixed results. We trimmed Arista Networks, Inc. (NYSE:ANET) several times during the year as it soared. Those trims, a very small one in March at roughly $163 and a larger one in August at $183, don’t look smart with Arista finishing the year at $235 (and up more in January). Arista rose 94% this year. The good news is, Arista finished the year as our second largest holding, at 7.9% of the portfolio.
If you are wondering how I could sell some Arista at $163 but then hold most of it at $235, the answer is that Arista’s outstanding competitive position in Artificial Intelligence became clearer to me as the year progressed. I felt in March that Arista would earn $8 per share in a few years. I see today that it might earn $8 in 2025.
It’s possible there is AI-related froth in the Arista stock price, but also probable that Arista will continue to grow rapidly as the computing centers that process AI queries require enormous amounts of data bandwidth. I believe Arista’s routers and switches are the best tools for routing so-called hyperscale traffic. Also, its operating software allows computer giants to manage the kudzu-like growth of their data centers, lowering their total cost of operation.
The sales of both Arista and Heico reflected my desire to manage PE multiple risk. I keep learning the hard way, however, that trimming your winners generally doesn’t add value. If the valuation is beyond justification, sell the position. If the valuation is high but the business continues to dominate its niche, grow steadily and add value for customers, maybe just take a walk around the block until the urge to sell goes away.”
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Disclosure: None. Edge Computing Market Size and Best Stocks To Buy is originally published on Insider Monkey.