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 Arista Networks, Inc. (NYSE:ANET) 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 technician in a server room managing a large-scale network of computers.
Arista Networks, Inc. (NYSE:ANET)
Number of Hedge Fund Holders: 69
Arista Networks, Inc. (NYSE:ANET) is an American computer networking company headquartered in Santa Clara, California. The company specializes in designing and selling multilayer network switches that enable software-defined networking for large-scale data centers, cloud computing, high-performance computing, and high-frequency trading environments.
In a recent report, Samik Chatterjee from J.P. Morgan maintained a Buy rating on Arista Networks, Inc. (NYSE:ANET), with a price target of $335. Additionally, Arista Networks, Inc. (NYSE:ANET) received a Buy rating from Barclays’ Tim Long in a report issued on May 9.
According to Insider Monkey’s first-quarter database, 69 hedge funds were bullish on Arista Networks, Inc. (NYSE:ANET), an increase from 64 funds in the previous quarter. Steve Cohen’s Point72 Asset Management was one of the largest stakeholders in the company, holding 987,926 shares valued at $286.47 million.
In the fast-evolving landscape of technology, Arista Networks (ANET) stands out as a compelling investment opportunity. Specializing in datacenter hardware and cloud networking solutions, ANET has been making waves in the industry for its innovative approach and consistent financial performance. The company is positioned to expand its presence in the Ethernet switches market, which is valued at $45 billion. Arista’s switches are highlighted for their efficiency in interfacing with advanced chips compared to competitors like Cisco. One of the key indicators of ANET’s strength lies in its impressive financial performance. The company has consistently surpassed market expectations, with better-than-expected quarterly results becoming a norm. Over the last four releases, ANET has exceeded consensus EPS estimates by an average of 15%, demonstrating its robust operational efficiency and strategic execution.
Moreover, Arista Networks has been riding the wave of the AI frenzy, further bolstering its growth trajectory. The company’s recent quarterly results underscore this momentum, with sales soaring to $1.5 billion in Q1, marking a remarkable 16% increase compared to the previous year. This stellar sales growth, coupled with the company’s ability to consistently deliver strong earnings, reflects ANET’s resilience and agility in navigating the dynamic tech landscape. The company recently raised its revenue growth guidance for the current fiscal year (FY24) to a range of 12% – 14%, signaling confidence in its future prospects. This upward revision sent ANET shares soaring post-earnings, further solidifying investor sentiment in the company’s growth potential.
The company announced a new $1.2 billion stock repurchase plan, highlighting its confidence in generating sustainable returns for investors.
Overall ANET ranks 6th 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 ANET 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 ANET 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.