Edge Computing Market Size and Best Stocks To Buy

In this article, we discuss the 10 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).

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. 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., 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, Amazon.com, Inc., and NVIDIA Corporation, Cloudflare, Inc. is one of the edge computing market leaders to watch. 

Baron Fifth Avenue Growth Fund stated the following regarding Cloudflare, Inc. 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., 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 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 is one of the top edge computing market leaders. 

On January 30, International Business Machines Corporation 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, 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 in its Q4 2022 investor letter:

“New positions initiated in Q4 included shorts International Business Machines Corporation, 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 ranks 8th on our list of the edge computing market leaders. 

On February 27, Hewlett Packard Enterprise Company 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, 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. ranks 6th on our list of edge computing market leaders

On February 12, Arista Networks, Inc. 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., 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, Amazon.com, Inc., and NVIDIA Corporation, Arista Networks, Inc. is one of the notable edge computing market leaders. 

Giverny Capital Asset Management stated the following regarding Arista Networks, Inc. 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. 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.”

5. Intel Corporation (NASDAQ:INTC)

Number of Hedge Fund Holders: 86

Intel Corporation (NASDAQ:INTC) is a global technology company engaged in designing, developing, manufacturing, and selling computing and related products and services. The company offers a diverse product portfolio, including central processing units, chipsets, system-on-chips, mobile and desktop processors, graphics processing units, accelerators, memory, storage, connectivity, and networking solutions. Intel Corporation is one of the top edge computing market leaders to consider. 

On January 25, Intel Corporation reported a Q4 non-GAAP EPS of $0.54 and a revenue of $15.4 billion, exceeding Wall Street forecasts by $0.09 and $230 million, respectively. 

According to Insider Monkey’s fourth quarter database, 86 hedge funds were long Intel Corporation, compared to 70 funds in the preceding quarter. William B. Gray’s Orbis Investment Management is the biggest stakeholder of the company, with 16 million shares worth $801.35 million. 

Upslope Capital Management stated the following regarding Intel Corporation in its fourth quarter 2023 investor letter:

“Intel Corporation – New Long: This is not a traditional long for Upslope in any sense. Intel is outside of the box in terms of typical sector and market cap focus, and the position is really a portfolio hedge (and structured as such). The thesis is very simple: Intel is uniquely positioned to benefit in two important scenarios, both of which require “protection” for Upslope’s portfolio: a continued melt-up in technology stocks and/or rising tensions over Taiwan. Combined with expectations and sentiment around Intel that were incredibly low, this nudged me to add exposure via long-dated INTC call options. While still material in terms of delta-adjusted exposure, the position has been reduced repeatedly and is much more modest today.”

4. Alphabet Inc. (NASDAQ:GOOG)

Number of Hedge Fund Holders: 166

In May 2022, Alphabet Inc. (NASDAQ:GOOG) acquired MobiledgeX, a company backed by Deutsche Telekom, with plans to open source its code and integrate it into Google Cloud. MobiledgeX, founded in 2018, specializes in federated telco edge cloud solutions adhering to GSMA standards. Moreover, Google Distributed Cloud (GDC), particularly the GDC Edge component, is integral to the success of Anthos, as it caters to both telecom operators and enterprise customers. GDC Edge is designed to position Anthos as the foundation for 5G infrastructure and modern workloads like AI and analytics. Alphabet Inc. is one of the best edge computing market leaders. 

On January 30, Alphabet Inc. reported a Q4 GAAP EPS of $1.64 and a revenue of $86.31 billion, outperforming Wall Street estimates by $0.04 and $1.04 billion, respectively. 

According to Insider Monkey’s fourth quarter database, 166 hedge funds were bullish on Alphabet Inc., compared to 163 funds in the last quarter. Ken Fisher’s Fisher Asset Management is the largest stakeholder of the company, with 45.2 million shares worth $6.3 billion. 

The FPA Crescent Fund stated the following regarding Alphabet Inc. in its fourth quarter 2023 investor letter:

“Alphabet Inc. continued going from strength to strength during 2023 despite concerns that competition may infringe on the company’s dominant position in Search. Thus far, Alphabet has continued to hold its own, and we look forward to seeing how the company incorporates further AI developments across the Alphabet ecosystem. Lastly, we are hopeful that the impending arrival of a new CFO will bring a renewed focus on efficiency – an area where we believe Alphabet has ample room for improvement.”

3. NVIDIA Corporation (NASDAQ:NVDA)

Number of Hedge Fund Holders: 173

NVIDIA Corporation is one of the best edge computing market leaders. NVIDIA offers Enterprise Edge Computing, Industrial Edge AI, and Autonomous Machines and Embedded Edge solutions. On February 21, the company reported a Q4 non-GAAP EPS of $5.16 and a revenue of $22.1 billion, outperforming Wall Street estimates by $0.52 and $1.55 billion, respectively. Revenue for the quarter increased 265.3% on a year-over-year basis. 

According to Insider Monkey’s fourth quarter database, 173 hedge funds held stakes in NVIDIA Corporation, compared to 180 funds in the last quarter. Rajiv Jain’s GQG Partners is a prominent stakeholder of the company, with nearly 14 million shares worth $6.8 billion. 

SaltLight Capital stated the following regarding NVIDIA Corporation in its fourth quarter 2023 investor letter:

“We were fortunate to have some exposure to some of the ‘Magnificent Seven’ – Amazon, NVIDIA Corporation, Meta Platforms and Google (although in aggregate, we still hold a smaller weighting than the S&P 500).

While we are cautious in AI infrastructure, we do think there are mispriced opportunities in areas of application software where AI can be infused to make a step change improvement. Posted in our office is this chart that ASML provides at each of its investor days. This chart is a little outdated from 2021, but we think illustrates how value (in operating profit) was distributed across semiconductors, hardware, and then software & services. It’s very clear that most of the economic value in the past has accrued to the software services (in gray) built on the backs of highly technical companies run by extremely smart people.

Why is this? We think it is due to a combination of distribution and network effects. Our working hypothesis right now is that this will likely remain a similar outcome in the AI epoch. One outlier right now is Nvidia which is capturing 80% margins..” (Click here to read the full text)

2. Amazon.com, Inc. (NASDAQ:AMZN) 

Number of Hedge Fund Holders: 293

Amazon.com, Inc.’s AWS edge services provide data processing, analysis, and storage in proximity to endpoints, enabling the deployment of APIs and tools outside AWS data centers. Amazon is one of the top edge computing market leaders. On February 26, AWS announced that it is set to invest $5 billion in cloud infrastructure projects in Mexico over the next 15 years. This initiative, part of a long-term commitment to Latin American markets, will establish the new AWS Mexico Region, providing enhanced access to advanced and secure cloud technologies for customers. The investment aligns with AWS’s commitment to offering advanced technologies like artificial intelligence and machine learning to customers. 

According to Insider Monkey’s fourth quarter database, 293 hedge funds were long Amazon.com, Inc., compared to 286 funds in the last quarter. Ken Fisher’s Fisher Asset Management is the largest stakeholder of the company, with 42.2 million shares worth $6.4 billion. 

Polen Global Growth Strategy stated the following regarding Amazon.com, Inc. in its fourth quarter 2023 investor letter:

“Amazon.com, Inc., which saw significant price appreciation throughout much of 2023, saw its share price increase materially in Q4 following the company’s Q3 2023 earnings report. We have yet to see the long-awaited re-acceleration in AWS (Amazon Web Services) revenue growth. However, in our estimation, the segment’s growth has likely bottomed, and we could see accelerating growth in 2024. Further, Amazon’s e-commerce business has gradually re-accelerated from 2022’s levels and, perhaps most importantly, the company’s margins and free cash flow have rebounded materially from last year. This rebound in margins and free cash flow at Amazon has been a key component of our long-term thesis for the business, and we expect the improvement in these metrics to continue into 2024 and beyond (though perhaps not linearly) as the company continues to optimize costs and capital expenditures. Our position in Amazon reflects our positive long-term expectations of the business, and it is currently our largest absolute weight in the Portfolio.”

1. Microsoft Corporation (NASDAQ:MSFT) 

Number of Hedge Fund Holders: 302

Microsoft Corporation ranks 1st on our list of the edge computing market leaders. Microsoft’s Azure IoT Edge enables the deployment and management of containers from IoT Hub, facilitating integration with Azure IoT solutions at the edge. 

On February 28, Barclays suggested that Microsoft Corporation’s investments in advertising could present a $50 billion opportunity, especially considering the ongoing antitrust issues surrounding Google’s dominance in search. Microsoft’s revamped search offering, incorporating generative AI features, is seen as a competitive move. The company’s acquisitions, including LinkedIn, PromoteIQ, and Xandr, position it to capitalize on advertising, potentially yielding a $30 billion organic revenue opportunity and an additional $20 billion windfall. Barclays maintained an Overweight rating on Microsoft stock with a price target of $475.

According to Insider Monkey’s fourth quarter database, 302 hedge funds were long Microsoft Corporation, compared to 306 funds in the last quarter. Bill & Melinda Gates Foundation Trust is the biggest stakeholder of the company, with 38.2 million shares worth $14.3 billion. 

RiverPark Large Growth Fund stated the following regarding Microsoft Corporation in its fourth quarter 2023 investor letter:

“Microsoft Corporation: MSFT was a top contributor in the quarter following strong FY1Q24 earnings in late October. In that earnings report, MSFT delivered better-than-expected revenue (+13%) and earnings (+27%), with growth in both accelerating from the prior quarter. All three major segments grew revenue faster than expected, highlighted by 28% constant currency growth in Azure, the company’s cloud offering. This marked the first quarter-over-quarter acceleration for Azure in six quarters. Operating margins (48%) were 400 basis points better than expected and earnings came in 13% ahead of expectations.

Cloud-based services have become the company’s largest revenue and earnings producer. The company’s Azure platform alone has the potential to grow to more than $100 billion in annual revenue over the next decade. Overall, we believe that the company will continue to deliver double-digit revenue and EPS growth and generate an enormous amount of free cash flow to both return to shareholders and use for acquisitions.”

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This article is originally published at Insider Monkey.