Although the broader technology space suffered a massive beatdown, investors still ought to consider the narrative undergirding the best edge computing stocks to buy. In simple terms, edge computing refers to a range of networks and devices positioned close to the end user. As you might suspect, the goal here is to bring processing “meat” closer to the source of demand, enabling greater efficiencies.
Ultimately, the main objective of most businesses associated with edge computing stocks centers on productivity enhancements. In other words, it’s not about reinventing the computer but making it better. Sure enough, the segment already captures extraordinary relevance, reaching a valuation of $44.7 billion in 2022. Experts project that this space will expand at a compound annual growth rate of 17.8% to hit $101.3 billion by 2027.
While certain subsegments present a higher-risk profile, the industry covers a wide spectrum, from public cloud providers to hardware manufacturers to content delivery networks. Below is a diverse list of edge computing stocks to buy for the coming boom.
An obvious choice among the biggest edge computing stocks to buy, Amazon (NASDAQ:AMZN) has long graduated from just being an e-commerce specialist. Among its many compelling business units stands Amazon Web Services, its public cloud computing network. Despite its exceptional relevance, AMZN presently occupies foreign territory: on a year-to-date basis, shares hemorrhaged 52% of equity value.
I’m not going to hold back any punches. Such a magnitude of volatility imposes grave concerns about its viability. Nevertheless, it’s also fair to point out that the tech sector overall suffered disproportionately in 2022. From global supply chain woes to geopolitical flashpoints to the Federal Reserve’s hawkish monetary policy to control inflation, growth-oriented AMZN absorbed some body blows.
However, daring contrarians of edge computing stocks may want to target Amazon. For one thing, its relevant business units (such as its cloud network) should become more prominent. As well, Gurufocus.com’s proprietary calculations for a fair market value imply that AMZN is significantly undervalued.
Both a software and hardware giant, from a broader tech perspective, you arguably can’t go wrong with Microsoft (NASDAQ:MSFT). One of my many arguments favoring MSFT focuses on the underlying business ecosystem. Essentially, the company’s Windows operating system (OS) dominates the global desktop OS market. Therefore, if you want to succeed in business, you must be fluent in Microsoft.
As both enterprises and individual professionals gravitate toward cloud computing, MSFT will subsequently garner more demand. Regarding the topic of best edge computing stocks to buy, Microsoft Azure has quickly risen up the ranks, supporting edge initiatives in both hardware and software.
To be fair, MSFT – like Amazon above – does not represent pure-play edge computing stocks. This diverse profile widens vulnerabilities, thus forcing MSFT to slip 30% YTD. However, as society normalizes, previously underappreciated business units may rise to the forefront, lifting shares.
Alphabet (GOOG, GOOGL)
One of the top names in big tech, no discussion about edge computing stocks to buy would be complete without mentioning Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL). Through its Google Cloud network, enterprises and individual worker bees can connect and collaborate, fostering (arguably) superior productivity. As well, the sheer dominance and intuitiveness of the wider Google ecosystem bring much intrigue to the table.
Because seemingly everybody uses Google – whether through its internet search engine or Gmail service – the ecosystem represents an organic transition. That’s going to be especially important with the burgeoning gig economy. With more people sick of the corporate nine-to-five branch out on their own, they will need mechanisms for client communications. Google is friendly, Google is familiar.
To be sure, what’s not so friendly is Alphabet’s market performance. For instance, the Class C GOOG dropped over 40% in equity value since the start of the year. Still, as workplace norms change, Google’s cloud network offers a compelling narrative. Thus, it’s one of the best edge computing stocks to buy.
Perhaps when most folks hear the name Nvidia (NASDAQ:NVDA), their minds immediately recall graphics processing units for video-gaming applications. While that’s one of the bread-and-butter business units for the company, Nvidia also ranks among the best edge computing stocks to buy, specifically in the hardware department.
Basically, Nvidia’s GPUs – which serve to accelerate computing processes – have also been integrated into cloud-based data centers. In addition, Nvidia also leverages its acumen toward innovations that may benefit from edge-computing infrastructures, such as self-driving cars. Obviously, with automated transportation, you want data to be as close to the source of demand as possible. Unsurprisingly, Nvidia represents one of the leaders in this exciting arena.
To be fair, what’s not so exciting is NVDA’s market performance. Since the beginning of the year, it’s lost over 53% of its equity value. As well, shares suffered a beatdown based on ongoing semiconductor industry weakness. Still, as I mentioned recently, the silver lining centers on analyst ratings. Wall Street experts still rank NVDA as a consensus strong buy.
Arista Networks (ANET)
One of the pioneers in software-driven cloud computing equipment, Arista Networks (NYSE:ANET) offers an intriguing case for edge computing stocks to buy. That’s because Arista has recently focused on what it terms “campus cloud,” essentially building smaller data centers for enterprises’ private use. In other words, the company extended the edge to a very localized level, potentially imparting myriad efficiencies.
Another factor that should bolster the case for ANET as a candidate for edge computing stocks to buy is cybersecurity. Per the underlying company’s website, “Arista is the only modern AI-driven security platform that offers key building blocks for a zero-trust strategy, automated and advanced, threat hunting as well as network forensics.”
As with other edge computing stocks, 2022 has not been kind to ANET, with shares dropping 16% YTD. However, the back half of the year presented an auspicious narrative heading into 2023. In the trailing six months, ANET gained almost 26% of its market value. It’s one to keep on the radar as the new year approaches.
A heavyweight in content delivery networks – which focus on moving and securing data between entities – Akamai (NASDAQ:AKAM) easily ranks among the best edge computing stocks to buy. Per its website, “Akamai has deployed the most pervasive, highly distributed content delivery network (CDN) with approximately 345,000 servers in more than 135 countries and over 1,300 networks around the world.”
Unfortunately, for the moment, Wall Street doesn’t quite see the potential for AKAM yet. Since the start of the year, shares fell 28%. Nevertheless, as cloud-computing demand increases, the need for CDN service providers should likewise rise. Enticingly, the market prices AKAM at 14.4 times forward earnings. In contrast, the sector median value is 23.3 times.
This might be a deal too good to pass up. At the least, it should warrant further investigation.
Also, AKAM features a consensus moderate buy rating among covering analysts. Perhaps most convincing of all, hedge funds have started bidding up AKAM, especially compared to the fourth quarter of 2021.
Sometimes, you need to take some risks in life to move ahead. But does this sentiment apply to edge computing stocks? The leadership team at Fastly (NYSE:FSLY) would probably like you to think so. A CDN specialist, Fastly utterly dominated during the middle phase of the post-pandemic new normal. For instance, between late 2020 to early 2021, FSLY occasionally reached an average three-digit price tag.
Unfortunately, circumstances changed for the worst in recent months. Presently, shares trade hand for a little over eight bucks a pop. In terms of performance, this framework translates to an almost 78% YTD loss. Not surprisingly, investment resource Gurufocus.com labels Fastly as a possible value trap. So, why would anyone consider FSLY as one of the edge computing stocks to buy?
Fundamentally, the underlying CDN market may expand at a compound annual growth rate of 23% from 2022 to hit sector revenue of $95.37 billion by 2030. When assessing the smart money, TipRanks notes that hedge fund sentiment for FSLY is “very positive.”
It’s risky as an F-bomb, let me be 1,000% clear. But if you want to roll the dice, Fastly is available.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.