Computers and smartphones are not the only devices that are connected to the internet. Everyday objects such as lamps, televisions, household appliances, cars and even doorbells communicate via the internet. The Internet of Things, or IoT for short, is a collective term for technologies that enable physical and digital devices to communicate via the internet. Companies that focus exclusively on the IoT are rather rare. They are often already well-known technology companies that are also active in the Internet of Things and thus exploit the potential of their respective industry. In this article, we present the IoT sector in general and a selection of Internet of Things stocks in detail.
WHAT IS THE INTERNET OF THINGS?
The Internet of Things (IoT) is a dynamic network in which physical objects - from household appliances to industrial equipment - are connected to the internet. This connection allows devices to collect, send and receive data, enabling them to act autonomously and respond intelligently to changes in their environment. This development represents a major advance and is changing the way technology is used in everyday life and business processes, opening up new horizons in terms of automation, efficiency and data-driven decision-making.
Core components and technologies of the IoT
Various key technologies form the basis of the IoT. At the forefront are sensors that collect a wide range of data, from temperature measurements to complex performance data. This data is transmitted via various network technologies such as Wi-Fi, Bluetooth or specialized IoT networks such as LoRaWAN.
This data is often processed and analyzed in real time using technologies such as edge computing and cloud platforms. Artificial intelligence and machine learning are also an integral part of IoT, as they enable data interpretation and autonomous decision-making. In terms of security, various approaches are being taken, from traditional encryption and authentication methods to innovative solutions such as blockchain, to improve integrity and security in IoT networks.
OVERVIEW OF THE IOT INDUSTRY
The IoT sector is one of the most dynamic areas of the modern technology world. Characterized by constant innovation and continuous development, the Internet of Things plays a crucial role in a variety of sectors. The industry is benefiting from the increasing spread of internet access, continuous improvements in network infrastructure and advances in related technologies such as artificial intelligence and machine learning.
Growth and current market trends
The IoT industry is in a strong growth phase, driven by the increasing demand for connected devices and intelligent solutions in private and commercial areas. Key trends include the increased integration of IoT into everyday products, the ongoing improvement in data security and privacy and the development of sustainable and energy-efficient IoT systems.
In Germany, the IoT market is expected to reach a volume of 51.05 billion euros by 2028, with an annual growth rate of 12.63% from 2023 to 2028. Globally, the market for IoT technologies is also on a strong growth trajectory, with a projected annual growth rate of 23.25% by 2028. Of particular note is the area of IoT analytics, which is set to record an even higher growth rate of 24.72% over the same period, driven by the increasing number of connected devices and the need for advanced analytics in companies. The IoT market is expected to grow by 18% in 2023, with more than 14.4 billion active connections. Forecasts even suggest that more than 27 billion IoT devices could be connected worldwide by 2025.
INVESTMENT OPPORTUNITIES IN IOT SHARES
The growth of the IoT sector opens up various opportunities for investors to benefit from this development. This includes investments in various types of companies, including hardware manufacturers, software and platform providers, connectivity and network service providers and security solution providers.
Hardware manufacturer
Companies that manufacture physical IoT devices such as sensors, chips and connected devices play a crucial role in the IoT market. Investing in these companies provides direct access to the manufacturers of key IoT products and components.
Software and platform providers
Software plays a crucial role in the Internet of Things, from device control to data analysis. Companies that develop IoT software solutions or platforms for data management and analysis offer interesting investment opportunities, particularly in areas such as cloud computing and AI-supported data analysis.
Connectivity and network service provider
Because IoT devices require reliable and often specialized network connectivity, companies that invest in connectivity solutions and network infrastructure for IoT are an important part of the IoT ecosystem.
Provider of security solutions
Security is crucial for the IoT. Companies that specialize in developing security solutions for IoT devices and networks offer a niche that is becoming increasingly important in times of growing digital threats.
THE LARGEST AND BEST-KNOWN IOT SHARES AT A GLANCE
In the table below you will find a selection of leading and well-known IoT stocks. Some companies, such as Cisco Systems and Intel, are established technology giants that are heavily involved in the development of IoT solutions in addition to their core businesses. Others, such as NXP Semiconductors and DexCom, are more focused on specific IoT applications, for example in semiconductor technology or the healthcare sector. Companies such as Siemens and Honeywell International show how traditional industrial companies are successfully expanding into the IoT space, while Cloudflare and Ericsson are using their expertise in networking to offer innovative IoT solutions. Alarm.com, on the other hand, specializes in security and automation systems for the IoT market.
| Company | Symbol | Country | Market capitalization |
| Cisco Systems | CSCO | USA | USD 196.96 billion |
| Intel | INTC | USA | 184.41 billion USD |
| International Business Machinest | IBM | Stock exchange: USA | USD 146.6 billion |
| Siemens | YOU | Germany | 136.35 billion USD |
| Honeywell International | HON | Stock exchange: USA | USD 130.39 billion |
| NXP Semiconductors | NXPI | Stock exchange: USA | USD 53.02 billion |
| DexCom | DXCM | USA | 44.51 billion USD |
| Cloudflare | NET | USA | USD 26.45 billion |
| Ericsson | ERIC.B | Sweden | USD 16.61 billion |
| Alarm.com | ALRM | USA | USD 2.76 billion |
CISCO SYSTEMS
- Company: Cisco Systems Inc
- Symbol (TWS): CSCO
- ISIN: US17275R1023
- Stock exchange: Nasdaq
- Country: USA
- Currency: US Dollar (USD)
- Market capitalization: USD 196.96
- Turnover (TTM) in USD: 58.03 billion
Cisco Systems is one of the leading providers of network hardware for companies. Cisco's products can be seen as the foundation of the Internet, which is why the company benefits as more and more Internet-connected devices enter the market. Cisco sells networking hardware designed to handle large numbers of connected devices, including rugged, durable products for industrial applications. On the software side, Cisco offers the Cisco Kinetic platform and other tools for managing IoT data and devices. Cisco is also one of the largest companies in the cybersecurity space. The company provides hardware, software, and services to protect networks from threats, including those specifically targeting IoT systems.
Brief analysis & outlook
Cisco Systems recently released its first quarter 2024 results, which exceeded analysts' expectations. The company reported adjusted earnings of $1.11 per share compared to the expected $1.03 and revenue of $14.67 billion versus an expectation of $14.63 billion. Despite these positive results, Cisco has lowered its revenue guidance for the second quarter and full fiscal year, which has led to a decline in its share price. The forecast for the second quarter is now $12.6 billion to $12.8 billion compared to an estimate of $14.2 billion, and the forecast for the full year has been revised to $53.8 billion to $55.0 billion compared to the previous estimate of $57 billion to $58.2 billion.
In terms of IoT strategy, Cisco is focusing on increasing its revenue through subscription-based software and services and moving away from its core business of selling network switches and routers. This strategic move towards recurring revenue could have a positive impact on the company's long-term stability and growth.
Cisco has also announced that it expects AI infrastructure products to be worth one billion dollars by 2025. These products are particularly interesting for large cloud companies that are increasingly relying on artificial intelligence. Cisco's Silicon One chips, which are suitable for ultra-fast switches and routers, could play a key role in this.
NXP SEMICONDUCTORS
- Company: NXP Semiconductors N.V
- Symbol (TWS): NXPI
- ISIN: NL0009538784
- Stock exchange: Nasdaq
- Country: USA / Headquarters: Netherlands
- Currency: US Dollar (USD)
- Market capitalization: USD 53.02
- Turnover (TTM) in USD: 13.17 billion
NXP Semiconductors is a semiconductor manufacturer headquartered in Eindhoven, the Netherlands. The company sells its products to various original equipment manufacturers, contract manufacturers and distributors. NXP Semiconductors' product solutions are used in a range of applications, including automotive, industrial, mobile, communications infrastructure, and Internet of Things products. For example, the company is working on new radar sensor chipset solutions that can wrap vehicles in a 360-degree safety cocoon. In addition to speed and distance measurement, this enables high-resolution object and feature recognition, which allows precise mapping of the vehicle environment and is a prerequisite for safe autonomous driving and should help customers meet all regulatory requirements.
Brief analysis & outlook
NXP is strongly positioned in IoT and the sector is becoming increasingly important for the company. NXP plays a particularly important role in the automotive sector, supplying components for the latest vehicle technologies that enable improved Wi-Fi and Bluetooth connectivity in cars. These advances support NXP's growth in the automotive sector, which is currently the main driver of the company's revenue and growth potential.
Another growth area for NXP is the ultra-wideband (UWB) market. The company has recently expanded its UWB product portfolio, including the Trimension NCJ29D6, an integrated automotive UWB system that combines real-time localization with short-range radar. These innovations strengthen NXP's position in the UWB market, which is expected to reach a market volume of 3.45 billion dollars by 2028.
Despite these positive developments, NXP faces challenges including rising expenses, supply chain bottlenecks and a slowdown in the industrial and IoT markets. For the fourth quarter of 2023, NXP forecasts a year-on-year decline in revenue of 1%.
CLOUDFLARE
- Company: Cloudflare Inc
- Symbol (TWS): NET
- ISIN: US18915M1071
- Stock Exchange: New York Stock Exchange
- Country: USA
- Currency: US Dollar (USD)
- Market capitalization: USD 26.45 billion
- Turnover (TTM) in USD: 1.21 billion
The IoT consists of countless devices connected to the Internet. At the same time, this often creates security threats that have given cyber criminals a chance to gain access to a network via smart IoT devices such as cameras or even household appliances. Hackers have used these devices to attack Internet-based services such as video streaming or social media by flooding them with digital traffic. These DDoS attacks pose a threat that should not be underestimated. Cloudflare is best known as a CDN (content delivery network). The company ensures that websites and Internet-based services are fast from anywhere in the world. However, Cloudflare is also a leading provider of DDoS protection. According to the company, its security network blocks an average of 70 billion threats per day. Cloudflare stock put on a tremendously strong performance in 2021, rising as high as $220. In the first half of 2022, many second-tier tech stocks crashed, and Cloudflare was not spared. At the time of writing this article, the share price is trading at USD 66, 70% below its all-time highs. For long-term investments, this price level could thus represent an attractive buying opportunity again.
Brief analysis & outlook
Cloudflare has secured a strong position in the market despite the challenges of recent years, which have been characterized by a slowdown in growth and increased caution in spending on cloud services. The company reported a solid growth rate with a 32% increase in annual revenue in the last quarter, driven by an increasing number of paying customers and increased usage of additional services by existing customers.
A key advantage of Cloudflare is its competitive pricing structure and leading network and security services, particularly in the area of Zero Trust security. In addition, Cloudflare is increasingly positioning itself in the growing market for AI workflows. The company is working with leading companies such as Nvidia, Microsoft and Databricks to integrate AI capabilities into its global network. In terms of the Internet of Things, Cloudflare's expertise in DDoS mitigation and CDN services positions it well to capitalize on the rapid expansion of the IoT sector.
SOFTWARE AG
- Company: Software AG
- Symbol (TWS): SOW
- ISIN: DE000A2GS401
- Stock exchange: XETRA
- Country: Germany
- Currency: Euro (EUR)
- Market capitalization: EUR 125.18 billion / USD 136.35 billion
- Turnover (TTM) in USD: 84.71 billion
Darmstadt-based Software AG is one of the few German companies that is seen as having a lot of growth potential due to the IoT. The company has already signed contracts with large corporations such as Bosch and has founded an IoT platform for machine builders in collaboration with Dürr, Carl Zeiss, DMG Mori and ASM Pacific Technology. Software AG's stock was not among the winners in the last two years. In addition to the problems caused by the pandemic, the company was also unable to meet expectations in 2021. However, the growth prospects remain positive.
Brief analysis & outlook
Siemens is facing a promising future, driven by important trends such as electrification, re-shoring, IoT and automation. The company is benefiting in particular from the increasing integration of renewable energies into the power grid, which is boosting demand for smart grids.
Another important growth area for Siemens is the industrial metaverse. By developing digital twins and collaborating with companies such as NVIDIA, AWS and Microsoft, Siemens is strengthening its presence in this area. The industrial metaverse offers new opportunities for collaboration, plant design and optimization, which in turn can help save resources and reduce emissions.
Siemens' consolidated profit recently reached a record level and the dividend was surprisingly raised. In addition, the company announced a new share buyback program with a volume of six billion euros. Revenue growth of four to eight percent is expected for the 2023 financial year, which is slower than in the previous year, but still solid.
INTEL
- Company: Intel Corporation
- Symbol (TWS): INTC
- ISIN: US4581401001
- Stock exchange: Nasdaq
- Country: USA
- Currency: US Dollar (USD)
- Market capitalization: USD 184.41 billion
- Turnover (TTM) in USD: 52.86 billion
The Internet of Things is not Intel's core business, but the chipmaker sells its products to cloud data centers that connect IoT devices, among others. Despite increasing competition, Intel still dominates the data center CPU market. In addition to powerful chips that process data in the cloud, Intel also sells chips for the edge. Intel also owns Mobileye, a leading developer of systems for autonomous driving and advanced driver assistance. In addition, Intel not only sells its own chips for various areas of the IoT market, but also invests billions of dollars in the expansion of its manufacturing capacities and in the development of its own so-called foundry business, whereby chips are manufactured for other companies.
Brief analysis & outlook
Intel has recently seen impressive growth in its Foundry Services (IFS) segment, which manufactures chips for enterprise and government customers. With third quarter revenue of $311 million, representing year-over-year growth of $299%, Intel is showing significant progress in this segment. Intel's positive development in the field of artificial intelligence and signs of recovery in the PC market are also contributing to the company's positive momentum.
Although Intel is not focusing exclusively on the Internet of Things, it is still benefiting from this growing market. In particular, Intel's edge computing solutions, such as the Xeon D processors with integrated AI for IoT applications, are designed for tough and robust conditions. Furthermore, through its majority stake in Mobileye, a leading developer of autonomous driving systems, Intel is well positioned to benefit from the increasing connectivity of vehicles.