You’ve heard of artificial intelligence, cloud computing, machine learning, 5G, Internet of Things and a host of other tech phrases that are legitimately disrupting how businesses and societies function.
I have what may be a new one for you, and it helps all those aforementioned technologies work: edge computing.
Almost everything we use on a daily basis has a computer in it, and as the Internet of Things permeates every facet of our lives, that will only accelerate. Not only will those computers multiply, they will collect exponentially rising amounts of data. The Covid-19 shutdowns and work-from-home trends have only accelerated this trend.
Cars, factories, phones, wearable devices and all other gadgets in the "smart" ecosystem receive data inputs and then must analyze all that information, and it's no small task to perform this seamlessly in real time. Typically this data is relayed back to the cloud, the computationally expensive work is performed, and the results are sent back to the device.
However as data volumes and sophistication needs grow, the sending of information to cloud servers for processing, analysis, and storage and then sending them back when a command is made is untenable. Latency issues constrain functionality, and all those tech concepts mentioned earlier simply won’t be able to perform to their full capacity without the use of edge computing.
What edge computing essentially is is the ability for smart devices to perform these functions locally, either on the device itself or on a close-by edge server. "Edge” refers the edge of the network, as close as possible to the physical device that’s being used and running fewer processes in the cloud. By conducting operations on the edge, systems and networks can perform more reliably, swiftly and efficiently without compromising functionality.
The technology is proliferating rapidly, and the estimations on its growth and market size vary widely, and all are bullish. The edge market was estimated between $1.7B to $7.9B in 2017, and is projected to grow to $16.5B to $43.4B between 2025 and 2027, producing a compound annual growth rate of between 11%-37%.
So how can you capitalize on this emerging tech? Many of the megacap names you may already own such as Microsoft (MSFT) - Get Report, Amazon (AMZN) - Get Report and Alphabet (GOOGL) - Get Report will be integral to edge computing as they incorporate it into their IoT platforms. Hewlett Packard Enterprise (HPE) - Get Report has made a $4 billion investment into its edge network, and IBM (IBM) - Get Report and Cisco (CSCO) - Get Report are emphasizing it as well.
However these aren’t very direct plays. If you want more explicit exposure to the edge, there are two smaller names that have had parabolic moves as of late that deserve your attention.
Cloudflare (NET) - Get Report, which went public last September, is a content delivery network (CDN), web security, and infrastructure company. Its presence in the edge is found in its CDN edge servers and Cloudflare Workers service that allows developers to capitalize on the proximity benefits of edge computing. It has also recently partnered with private edge computing companies to continue to expand its services. The stock is up 110% YTD.
And the hottest name in all of tech lately, not just the edge, is Fastly (FSLY) - Get Report. It recently supplanted Zoom as the best-performing tech company of the coronavirus pandemic, with a staggering 278% YTD return, on the heels of a torrid 60% move over the just last seven trading days. Fastly’s edge cloud platform provides CDNs, load balancing, internet security, and streaming services. It’s grown revenues 39% and 38% YOY in each of the last two quarters, and is targeting 42% for the year.
Shopify (SHOP) - Get Report is one of its largest clients, and part of Fastly's huge run has been growth expectations around the recent Shopify/Facebook (FB) - Get Report and Shopify/Walmart (WMT) - Get Report partnerships. The added online activity this drives towards Shopify will increase demand for Fastly's services.
Now that edge computing is part of your vocabulary, be sure to keep an eye on this space.