Top IoT Stocks for 2021: These Top Growth Stocks Are Ushering in the Internet of Things
We take it for granted today that our phones connect to the Internet and that we have smart speakers we can ask questions to and actually get answers from! The idea that we can turn on our lightbulbs with our voices and that our cars can be updated with new software to make them more efficient (and faster!) is starting to become commonplace.
All of the above is just a small sampling of the broader Internet of Things (or IoT). The IoT encompasses nearly anything that connects to the internet and it’s transforming everything from consumer electronics to factory automation, and even the healthcare industry.
The fact is that connecting nearly anything to the internet has become such a popular idea that nearly every major tech company is trying to figure out how to benefit from this $1.5 trillion industry (by 2025).
Investors can benefit from the IoT by buying the top growth stocks that are already leading the way. So let’s take a quick look at five of the best stocks Internet of Things investors can buy now.
5 Internet of Things Stocks for 2021
These are the top 5 IoT stocks poised for growth in the coming years.
Apple (Nasdaq: AAPL)
Price: $145.86 (as of close Jul 30, 2021)
Apple is a prime example of a great IoT stock because the company has seamlessly transitioned to IoT devices in its product lineup and it has massive upside potential for investors.
The most notable IoT device the company sells is its Apple Watch. The smartwatch was launched back in 2015 and is one of the leading smartwatches worldwide. The company has consistently tweaked its Watch over the years, adding notable features like an ECG (electrocardiogram) for heart monitoring, waterproof versions, fall detection, and cellular connectivity.
As cool as Apple’s Watch is already, investors should know that we’re only at the beginning of how devices like this will be used. Consider that Apple and BMW recently started working together to allow Apple’s smartwatch to unlock and start some BMW vehicles!
The point here is that IoT devices like the Apple Watch are more than just another consumer device—they’re beginning to change how we interact with other things around us.
Apple isn’t financially dependent on its Apple Watch, but that doesn’t mean it isn’t a great IoT play. The company generated $7.8 billion from its wearables, home, and accessories segment (which includes its Apple Watch and devices like its Airpods) in the first three months of 2021 and it has big plans that could soon change the IoT landscape even further.
Rumors have swirled for years that Apple is working on a glasses device that could incorporate augmented reality (AR) technology. The device could allow users to do everything from getting directions displayed right in front of their eyes, to making and receiving phone calls, and even accessing the device’s own app store.
While it’s still just speculation, an Apple Glasses device is expected to debut in the next few years.
Apple has traditionally been one of the best tech stocks to own and betting on this tech giant as an IoT play is a wise long-term investing strategy.
Amazon (Nasdaq: AMZN)
Price: $3327.59 (as of close Jul 30, 2021)
Amazon is poised to become the largest retailer in the United States in 2022, outpacing Walmart for the top spot. One thing that’s helped the e-commerce giant to become a runaway success is how it creates new products and services that its users find very compelling.
Not surprisingly, that includes Internet of Things devices like the company’s popular Echo smart speakers. The devices are on their fourth iteration and include the company’s prolific smart assistant, Alexa, which can answer questions, play music, set reminders, and even help you order food.
Amazon is by far the most successful seller of smart speakers, with the company holding 28% of the global smart speaker market at the end of 2020, compared to Alphabet’s Google at 22%.
But Amazon’s Echo speakers are much more than just a side project for the company. Amazon essentially sells these devices at cost so that it can make far more money from its customers who use them to buy more items from its e-commerce store.
Dave Limp, Amazon’s senior vice president of Amazon’s devices and services, has said that people who own Alexa devices, including the Echo, buy more digital goods from the company, including music and audiobooks, than those who don’t.
In fact, some research conducted back in 2018 showed that Echo owners spent several hundred dollars more each year on Amazon than those who don’t own the devices.
The devices could eventually help Amazon capture even more advertising dollars as well, since the company sometimes plays audio ads on the speakers. Amazon’s advertising business—which surpassed 10% of the U.S. ad market for the first time in 2020—is increasingly considered a key ingredient in the company’s future growth.
Amazon has many more Alexa-enabled devices than just its smart speakers, and in the coming years, you can bet that Amazon will continue to use these IoT devices to keep users tied firmly to its ecosystem and fuel new revenue opportunities.
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Qualcomm (Nasdaq: QCOM)
Price: $149.8 (as of close Jul 30, 2021)
One critical party of the Internet of Things industry is, well, the internet aspect. And that’s why Qualcomm deserves to be on this list. The company makes semiconductors and telecommunications equipment for 5G technology, which will be the backbone of the IoT of the future.
5G differs from 4G and other cellular generations before it not just because its speeds are up to 100 times faster than 4G, but also because 5G also has lower latency speeds as well, making it faster for devices to connect to cellular towers.
So where does Qualcomm fit into all of this? The company’s 5G modems and other connectivity chips can be used in everything from internet-enabled cars to industrial IoT equipment.
So while other companies may make cool IoT gadgets, Qualcomm is actually designing the chips that will allow many of those devices to get online.
Qualcomm also has a massive opportunity in the IoT space with its intellectual property (IP). The company collects royalties on its 3G, 4G, and some 5G patents.
While Qualcomm’s IP doesn’t bring in the same margins that it once did, its patents will still allow the company to collect significant revenue from cellular-enabled devices. And that’s notable because over the next four years more than 41 billion IoT devices will be connected to the internet.
Qualcomm’s stock has been more volatile than some of the other IoT companies on this list, but its long-term gains are still very impressive. Over the past three years, Qualcomm’s stock has gained 136% compared to the S&P 500’s 55% gains.
Alphabet (Nasdaq: GOOG) (Nasdaq: GOOGL)
It’s nearly impossible to match the scale of Alphabet’s operations. The company has $135 billion in cash that it can wield at nearly any industry it wants and then use its technological know-how to start dominating.
And that’s exactly what Alphabet has done in the IoT. Alphabet began developing its own smart home technologies years ago and has since added to it with its purchase of Nest and Fitbit.
Google Nest products consist of everything from thermostats to smoke alarms, smart speakers, and WiFi routers. The company’s Nest lineup puts Alphabet firmly at the forefront of the smart home industry, an IoT sub-sector that will be worth an estimated $208 billion globally by 2027.
Google’s smart speakers are the No. 2 best-selling smart speakers in the United States behind Amazon’s Echo speakers, and the company has big plans for other markets as well. Google bought Fitbit earlier this year, giving the company even more exposure to the IoT through smartwatches and fitness trackers.
Finally, Alphabet is also a leader in the self-driving automotive market through its Waymo company, which has already launched a limited public self-driving car business in Arizona, with plans to eventually bring it to other areas of the country.
Waymo vehicles have already driven 20 million miles in the real world since 2019. And as this IoT market grows, Waymo will likely benefit. The cost of running ride-hailing services is becoming cheaper and AVs could help further reduce the gap, with some estimates placing the cost of using autonomous ride-hailing at cheaper than vehicle ownership by 2027.
Alphabet makes the vast majority of its revenue from selling ads online, but with the company’s huge moves into the smart home space, wearable technology, and AVs, it’s clear that Alphabet is poised to dominate the IoT.
Microsoft (Nasdaq: MSFT)
If you’re still thinking of Microsoft as just a slow-moving legacy tech company, then let me introduce you to the new Microsoft, the one that’s reinvented itself as a leading cloud computing company over the past several years.
Microsoft’s Azure cloud computing company holds about 19% of the public cloud computing market and is the second-largest cloud player behind Amazon.
Why does that matter for Microsoft and the IoT? Because Microsoft is using its cloud position to add new services, including Azure for IoT, that help billions of devices collect and analyze data like never before.
Healthcare companies can use Azure for IoT to track patient data and come up with better solutions for patients, while industrial companies can implement Microsoft’s cloud service to keep track of factory equipment and manage automation.
The fact is that cloud computing services are already a critical part of the IoT. And it’ll soon become even more important as more data is collected from devices and more artificial intelligence will be needed to analyze that information to make decisions (think driverless cars needing to process driving conditions in real-time).
Microsoft’s cloud will help make it all possible and the company is already benefiting from its cloud position right now. Over the past three years, Microsoft’s stock has skyrocketed 165%, easily outpacing the S&P 500’s 55% gains.
Internet of Things ETFs: Invest in a Basket of IoT Stocks
Some investors may not feel comfortable sifting through the stock market and picking a few IoT stocks for their portfolio, and that’s okay! It can be overwhelming to look at all the Wall Street recommendations for any industry and try to pick out a few that you think will be long-term winners.
If that’s you, then an Internet of Things exchange-traded fund (ETF) that will give you exposure to a lot of IoT stocks all at once may be just what you’re looking for.
One IoT ETF you may want to consider is the Global X Internet of Things ETF (Nasdaq: SNSR), which invests in 45 stocks, including some not listed here like International Business Machines (NYSE: IBM), Dexcom (Nasdaq: DXCM), and Cisco Systems (Nasdaq: CSCO).
Frequently Asked Questions
What is the best Internet of Things stock?
There are many companies benefiting from the Internet of Things, but two of the best-performing stocks on this list are Apple and Microsoft. The iPhone maker’s stock price has jumped 188% over the past three years, while Microsoft’s has gained 166%.
How much do Internet of Things stocks cost?
You can buy shares of any of the companies on this list for exposure to the Internet of Things. Additionally, you can buy stock in an IoT ETF to invest in the Internet of Things as well. The share prices of IoT stocks and IoT ETFs will vary.
What companies are involved in the internet of things?
There are many companies involved in the internet of things, including Apple, Amazon, Qualcomm, Alphabet, and Microsoft. There are also smaller players in this space like Dexcom, Sierra Wireless, NXP Semiconductors, and others.