We recently published a list of 8 Cloud Computing Stocks Under $10. In this article, we are going to take a look at where Rackspace Technology, Inc. (NASDAQ:RXT) stands against other cloud computing stocks under $10.

As per Nasscom Community, the cloud computing market saw a staggering growth in 2024, touching $1.2 trillion. This market was aided by significant demand for scalable, efficient, and cost-effective digital solutions. Some of the critical growth drivers include the proliferation of remote work, acceleration in digital transformation initiatives, and robust adoption of IoT devices.

AI To Drive Growth in Cloud Computing

Over the past few years, cloud computing has merged with Al and redefined business operations throughout industries. As per Industry experts, cloud strategies have been shifting as organizations continue to utilize more services and Al is expected to be one of the biggest drivers. John Samuel, global CIO, and EVP at a global IT and outsourcing provider, believes that cloud providers have invested significantly in GenAl technologies and are collaborating with chip manufacturers to enhance performance and scalability.

According to Samuel, these alliances should enable cloud platforms to power a growing ecosystem of downstream SaaS providers that build solutions to allow easier adoption of Al-based solutions. Therefore, GenAl continues to be a key enabler for adopting advanced Al capabilities throughout industries, with the cloud acting as the backbone.

As per Alex Turgeon, President of Valere, Al is expected to drive ~35% of the cloud computing market’s growth over the upcoming 2 years. In 2025, Al and cloud computing are expected to form an inseparable partnership. Alex Turgeon believes that investments by companies in Al-enabled cloud infrastructure should enhance scalability, performance, and accessibility. As per Deloitte, 70% of the companies that are adopting Al will adopt it via cloud-based infrastructure.

Key Cloud Computing Trends for 2025

According to Nasscom Community, future developments in the cloud computing field are expected to be aided by multi-cloud strategies. This will involve the use of more than one cloud service provider between the business and the cloud altogether. By 2025, different cloud networks can communicate, which will result in more interoperability between different cloud platforms. By next year, companies are expected to focus on green cloud initiatives. Therefore, cloud solution sustainability with respect to infrastructure is expected to become a major trend by 2025.

Well-established cloud service providers continue to focus on cutting their global emissions as they tap the green data centers making use of renewable energy such as wind and solar installations. While some leading technology firms use renewable energy sources in their data centers, others have committed to achieving carbon negativity by the year 2030. Nasscom Community went on to add that firms will look for cloud service providers that have solid sustainable solutions, such as carbon neutrality in computing strategies on corporate responsibility programs.

Our Methodology

To list the 8 Cloud Computing Stocks Under $10, we used a screener and online rankings to extract the list of companies belonging to the cloud computing industry. After getting an initial list of 20-25 stocks, we filtered out the ones trading below $10. Finally, the stocks were ranked in ascending order of their hedge fund sentiments, as of Q3 2024.

At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

Rackspace Technology, Inc. (NASDAQ:RXT)

Share Price as of November 26: $2.64

Number of Hedge Fund Holders: 13

Rackspace Technology, Inc. (NASDAQ:RXT) is a provider of end-to-end multi-cloud technology services. The company designs, builds, and operates its customers’ cloud environments across technology platforms. It helps businesses optimize their use of cloud technologies. While Rackspace Technology, Inc. (NASDAQ:RXT) expects a 30% YoY revenue growth in its healthcare Private Cloud business for fiscal 2024, analysts are optimistic about a significant milestone in this business as the company saw a major healthcare provider migration. The company announced deploying an Epic Electronic Health Record (EHR) system for AdventHealth on its Healthcare Cloud platform.

To be precise, Rackspace Technology, Inc. (NASDAQ:RXT) is fully hosting and managing the Epic environment and 9 other strategic applications in the AdventHealth IT portfolio. This development indicates that the company remains focused on the healthcare and BFSI sectors. Also, it expects these verticals to account for one-third of total revenue by fiscal 2024. This means that it is targeting a service-led approach.

Rackspace Technology, Inc. (NASDAQ:RXT) continues to grow its service offerings, like its launch of GPU-as-a-service powered by Nvidia. This initiative aims to address the increased demand for high-performance computing resources, which remains important as cloud services continue to evolve and more industries decide to go for specialized infrastructure. As per Wall Street analysts, the shares of Rackspace Technology, Inc. (NASDAQ:RXT) have an average price target of $2.89.

Overall, RXT ranks 5th on our list of cloud computing stocks under $10. While we acknowledge the potential of RXT as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than RXT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.