We recently compiled a list of the Edge Computing Market Size and 7 Best Stocks To Buy. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against the other edge computing stocks.
What is Edge Computing?
The information technology sector has consistently outperformed investor and analyst expectations in 2023, and this trend appears to be continuing into the current year. This impressive performance can largely be attributed to significant advancements such as the rise of artificial intelligence (AI) and generative AI, which have driven tech stock prices to unprecedented highs. Of course, AI is not the only area that is revolutionizing the technology space. Edge Computing comes in as another compelling area of growth and investment. Also known as Mobile Edge Computing (MEC) or Multi-Access 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 layman’s terms, Edge Computing involves relocating part of the storage and computing capabilities from a central data center to locations near the data sources.
By keeping computational capacity close to users, devices, or data sources, edge solutions offer benefits such as reduced latency, increased bandwidth, local device processing, and data offloading. For instance, smart speakers perform minimal computational work, sending requests to servers owned by the provider. With Edge Computing, smart speakers could process a user’s request entirely on the device itself. Gartner, in its March 2024 Market Guide for Edge Computing, states:
“By placing data, data management capabilities and analytic workloads at optimal points, ranging all the way to endpoint devices, enterprises can enable more real-time use cases. In addition, the flexibility to move data management workloads up and down the continuum from centralized data centers or from the cloud-to-edge devices will enable greater optimization of resources.”
Edge Computing with the Internet-of-Things & Artificial Intelligence
The automotive industry is a prime example of rapid advancements driven by edge computing and artificial intelligence (AI) integration in recent years. As vehicles evolve to incorporate self-driving capabilities, these technologies have become essential for effective decision-making and real-time responses. For instance, Tesla leverages extensive real-world driving data to refine its AI algorithms for autonomous driving. The rollout of EV maker’s Full Self-Driving (FSD) beta software to more drivers highlights its performance in real-world conditions, with the vast amount of visual data collected during these drives enhancing the company’s AI learning process.
Furthermore, the advent and adoption of 5G, the fifth generation of cellular network technologies offering substantially greater bandwidth, is accelerating the growth of Internet-of-Things (IoT) and facilitating the widespread adoption of edge computing. With 5G networks enabling lightning-fast speeds and a greater number of connected devices, data volumes are expected to surge. Predictions state that by 2025, every connected person will interact with digital data at least once every 18 seconds, largely due to the billions of IoT devices projected to generate over 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 was valued at $15.96 billion in 2023 and is projected to grow from $21.41 billion in 2024 to $216.76 billion by 2032, at a compound annual growth rate of 33.6% over the forecast period. This growth is fueled by the increasing adoption of edge devices, ranging from IoT devices such as mobile point-of-sale kiosks and smart cameras to computational infrastructure that enables faster and real-time data analysis at the source. On the other hand, PwC projects that the global market for edge data centers will nearly triple, growing from $4 billion in 2017 to $13.5 billion this year. This expansion is driven by the potential of locally situated data centers to reduce latency, manage intermittent connections, and facilitate data storage and computation close 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
For our list of the best edge computing stocks, We began by sifting through ETFs’ holdings and online rankings to gather a preliminary list of 15 stocks. We then scanned Insider Monkey’s first-quarter database which tracks 920 elite money managers and selected the top seven that were the most widely held by hedge funds.
Why are we interested in 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).
A development team working together to create the next version of Windows.
Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 293
Microsoft Corporation (NASDAQ:MSFT) is an American multinational technology company based in Redmond, Washington. The company is best known for its software products, including the Windows operating systems, the Microsoft 365 suite of productivity applications, and the Edge web browser. Microsoft Azure has rapidly gained prominence in the realm of edge computing by supporting edge initiatives in both hardware and software.
Among the hedge funds tracked by Insider Monkey, Texas-based Fisher Asset Management is a notable shareholder in Microsoft Corporation (NASDAQ:MSFT), holding 25.9 million shares valued at over $10.9 billion.
New Street Research recently initiated coverage of Microsoft Corporation (NASDAQ:MSFT) with a Buy rating, stating that the company is well positioned to grow profits in the “low teens for years to come,” even if the AI revolution doesn’t fully materialize. They set a price target of $570 on the stock. Additionally, on June 14, Tigress Financial Partners updated their outlook on Microsoft Corporation (NASDAQ:MSFT), raising the 12-month price target to $550 and maintaining a Buy rating all the while emphasizing the company’s strategic position to lead the AI revolution, which has been a key driver of its financial performance.
In its recent earnings report, Microsoft Corporation (NASDAQ:MSFT) posted a 17% year-over-year increase in quarterly revenue, reaching $61.9 billion. This growth was driven by strong performances across various segments, including a 23% increase in cloud revenue, totaling $35.1 billion. The expansion of Microsoft Corporation (NASDAQ:MSFT)’s cloud services, particularly Azure, played a central role in this success, supported by significant customer migration and a growing number of large Azure deals.
Baron Fifth Avenue Growth Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its first quarter 2024 investor letter:
“Our second largest purchase during the quarter was the software platform, Microsoft Corporation (NASDAQ:MSFT), which we continued to add to, after initiating a position in the fourth quarter of 2023. Microsoft continues to report strong quarterly results, with revenue growth of 16% year-over-year in constant currency thanks to better-than-expected demand in its intelligent cloud segment, which saw revenue growth of 19% year-over-year, driven by Azure growth of 28% with AI contributing 6pts to growth compared with 3pts in the prior quarter. While the adoption of GenAI remains in its early stages, Microsoft has disclosed positive initial data points with 53,000 Azure AI customers as of its December quarter up from 18,000 in the prior quarter, 1.3 million paid GitHub Copilot subscribers (up 30% sequentially) and more than 230,000 organizations who have used AI capabilities in the power platform (up 80% sequentially). Management also noted that large cloud optimizations that started a year or so ago have largely finished. Profitability also continues to be strong with 44% non-GAAP operating margins, which was 120bps better than expected.”
Overall MSFT ranks 2nd on our list of the best edge computing stocks to buy. You can visit Edge Computing Market Size and 7 Best Stocks To Buy to see the other edge computing stocks that are on hedge funds’ radar. While we acknowledge the potential of MSFT as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as MSFT 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.
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