When it comes to gaining exposure to the generative artificial intelligence (GenAI) growth boom, investors have many options. However, owning shares in AI chip makers, or software companies, isn’t the only way to play this trend. One can also gain exposure, by owning of edge computing stocks.
What is edge computing? A computing model that differs from the traditional data server model, edge computing entails functions like calculations and data storage happening closer to the data source. This results in faster application speeds.
Rising adoption of GenAI technology is leading to greater demand for edge computing. As a result, this area of tech is expected to experience growth at a rapid pace in the years ahead.
With this, companies that provide the infrastructure, hardware and services necessary to power edge computing applications, stand to experience strong growth. While the rise of this area of tech may be a secondary catalyst for each of these edge computing stocks, it may just well contribute to them being multibaggers in the years ahead.
Arista Networks (ANET)
Thanks to the AI boom, Arista Networks (NYSE:ANET) has already become a multibagger stock. Since the start of 2023, shares in this cloud networking solutions provider have nearly tripled in price. After reaching a record high earlier this month, ANET has pulled back. Investors now may be concerned that the stock has peaked.
However, while concerns about another “AI bubble” are rising, much suggests that ANET stock could keep on climbing, thanks to its high exposure to the overall GenAI trend. In particular, in areas like edge computing. Edge computing may not be Arista’s main business, but outsized growth of this segment may help to drive overall growth for the company.
The edge computing industry grows as expected, at a compounded annual growth rate (CAGR) of 36.9% between now and 2030. This, alongside other factors, may enable Arista to hit the top end of earnings forecasts over the next few years. The high end of sell-side earnings for Arista in 2026 currently come in at around $12 per share. That represents a 60% increase compared to analyst consensus for this year. With all of this in mind, consider ANET one of the top edge computing stocks.
Alphabet (GOOG, GOOGL)
Shares in Google parent Alphabet (NASDAQ:GOOG,NASDAQ:GOOGL) are another great vehicle for adding exposure to the edge computing growth trend. Alphabet is of course already considered one of the top stocks to own for exposure to the generative AI growth trend.
One Alphabet segment that especially stands to benefit from the rise of GenAI is Google Cloud. Via its Google Distributed Cloud service, this public cloud is a leading provider of edge computing services to large companies like McDonald’s (NYSE:MCD), as well as governmental agencies like the U.S. Department of Defense. Much like with ARET, the rise of edge computing alone may not be what leads to multibagger gains for GOOG stock in the years ahead.
Rather, growth in this segment, coupled with growth in Alphabet’s search, streaming, and other major business segments, may result in a level of growth sufficient to send shares to prices many times that of current levels. According to the latest sell-side forecasts, GOOG could generate earnings topping $10 per share during 2026. Meeting or beating these high-end forecasts, combined with some multiple expansion, could result in shares trading at double current prices two years from now.
Hewlett Packard Enterprise (HPE)
Hewlett Packard Enterprise (NYSE:HPE) could be another winning edge computing stock in the making. Based on recent results, HPE has been experiencing weak revenue growth and declining profitability. Even so, analysts like Argus’ Jim Kelleher are bullish that the technology hardware company will soon benefit from the AI growth trend.
Back in June, Kelleher upgraded HPE stock from “hold” to “buy,” based on this thesis. Per the analyst, existing business lines for Hewlett Packard Enterprise, such as edge-to-cloud data, could return to growth mode going forward. The company is also well-positioned to capitalize on the ever-increasing demand for AI hardware. Kelleher’s price target for HPE is $26 per share. That’s around 23.8% above current prices.
Better yet, the potential long-term upside with HPE could be even more significant. If the growth trends like AI and edge computing prove to benefit the company more significantly than expected, not only could shares rise on earnings growth. This stock, currently trading at a low 10.9 times forward earnings, may experience a bump up in valuation. Even a move to a mid-teens multiple, coupled with double-digit earnings growth, could be enough to send shares to prices double that of present levels.
On the date of publication, Thomas Niel did not hold (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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
