Cloud computing has been one of the biggest trends within the technology space over the past decade. And with the rise of cloud-based software comes a new opportunity: fog computing stocks.
Fog computing is a type of decentralized computer architecture that aims to improve the efficiency of cloud computing operations. It works by analyzing, processing and storing data at an intermediary point between the user and the cloud computing location.
By reducing the amount of superfluous data that a cloud server has to deal with, this should lower costs significantly. Artificial intelligence is driving a massive increase in data volumes and computing intensity. But fog computing can help to balance the load on servers and network infrastructure. Also, it improves latency and user experience.
There aren’t that many pure play fog computing stocks yet. The field is still in its early days and various fog start-ups haven’t gone public yet. Thankfully, a few leading tech companies are also involved in fog computing. So investors can profit as fog computing’s total addressable market grows.
Cisco Systems (CSCO)
Cisco Systems (NASDAQ:CSCO) is an integral player in the emerging fog computing landscape. In fact, Cisco coined the term fog computing a decade ago.
Consider the following Cisco Systems blog from years ago describing the vision for this network architecture.
“The distinguishing Fog characteristics are its proximity to end-users, its dense geographical distribution, and its support for mobility. Services are hosted at the network edge or even end devices such as set-top-boxes or access points. By doing so, Fog reduces service latency, and improves QoS, resulting in superior user-experience.”
This is arguably the perfect growth opportunity for Cisco Systems. The company is known for its industry-leading networking equipment. And fog computing allows it to deploy more hardware close to end clients, rather than everything being centralized at cloud data centers.
In addition, Cisco Systems has built an impressive cybersecurity business in recent years. Particularly in the wake of the recent Crowdstrike (NASDAQ:CRWD) blunder, Cisco Systems could use this new fog computing architecture to sell more security software to secure all vulnerability points along a data highway.
International Business Machines (IBM)
International Business Machines (NYSE:IBM) is one of the most innovative companies in the world. In fact, it has long led the way in the number of patents obtained annually, showing the company’s commitment to applied research and development.
IBM is an emerging leader in fields such as smart dust, which are microscopic-sized computers, that are hardly on anyone’s radars yet.
Not surprisingly, IBM has been hard at work in mist and fog computing for many years now. It is securing the required patents and institutional knowledge to develop a leadership position in this emerging field.
Recall that IBM was the first big company to bet on AI, building its Watson system back in 2004, long before AI came into vogue. Some of IBM’s initiatives take eons to pay off. But the company’s robust pipeline of novel technology, including fog computing, should create shareholder value over time.
Intel (INTC)
Intel (NASDAQ:INTC) is another clear winner from fog computing.
The beautiful fact, from Intel’s perspective, is that distributing computing creates a broader demand for computing chips while reducing the burden on specific cloud data centers.
Intel is facing intensive competitive pressure in the highest-end part of the data center chip market. A fully cloud-based computing market is one where Intel faces more competition and the potential for a significant hit to its profit margins.
By contrast, by using fog computing to distribute processing across various sites and IoT applications, Intel has opportunity to sell more units overall while sheltering it somewhat from competition in the data center market.
Intel has plenty of issues right now. Traders are understandably nervous. But don’t lose sight of the fact that the company spends more than $16 billion annually on research and development. And that gives it plenty of technical firepower to take advantage of new markets as they emerge.
On the date of publication, Ian Bezek held a long position in IBM and INTC stock. 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.