Research firm IDC defines the IoT market’s growth potential as “explosive,”
That word is music to investors’ ears.
This is what you need to know about investing in the connection of everyday objects—from home thermostats to public trash bins—to the Web.
Sure, we all know about the Apple Watch, Fitbit and Nest. They work to connect our mobile devices to how we live, how we text, and how our homes run.
They’re also the technologies that are seeing the biggest growth—which means the biggest opportunities for investors.
However, when navigating the complex world of “dongles” and chips, you’ll see there’s a lot more out there than just fitness trackers and thermostats for investors intent on getting the most out of their IoT and the projected 50 billion devices expected to be online by 2020.
Here’s what you need to know to get started in trading the IoT.
The biggest players in the IoT world are, naturally, some of the biggest in the tech world: Google and Apple.
Google, now Alphabet Inc. (NASDAQ: GOOG), bought Nest Labs for $3.2 billion earlier this year. Then, the company bought startup Dropcam for $555 million in cash.
The Nest systems, which are starting to show up in the nicest model homes, can control your home’s temperature at the swipe of a button on your phone. They can also control a variety of home functions.
Dropcam makes cameras that stream secure, live footage from your home.
Those are just two examples of how Google is looking at the market, but its real strength is in its purchase of a suite of companies that helps developers, manages the cloud, and can take advantage of the company’s massive infrastructure to connect everything.
For many of us, the first IoT devices we’re seeing come from Apple Inc. (NASDAQ: APPL).
The Apple Watch is a big hit. The company’s stock has been rising since the release of both the watch and its ultimate IoT device, the new iPhone 6s.
Naturally, Apple has more big plans.
Now, there’s Apple HomeKit, which it hopes will become the de facto platform for many of the devices you’ll buy.
The HomeKit can control everything from locks to thermostats, all from your phone.
Some find the idea of controlling everything from a phone scary, but the HomeKit ensures that everything is secure. This, on top of the success the company is having with Apple Pay, is another reason to look at Apple’s stock.
All of these devices, however, will need an Internet dongle or chip that connects any device.
There are three main competitors out there looking to capitalize on the IoT revolution, and each is trying to get its dongles and chips into everything you drive, wear and can control with your phone.
So far, in the last two months, all of the chipmakers have seen their stocks rise as the PC market has slowed.
Each company in the chip space is seeing growth opportunities in the IoT market because of the decline in the overall PC sales market.
Intel (NASDAQ: INTC) is making waves with its IoT division, and is trying to leverage its decades of chip-making experience into the mobile realm with its Edison chipset.
The Edison is a chip with built-in Bluetooth capabilities that allows any maker to connect it easily to the cloud.
Intel’s stock has been on a tear since hitting a 52-week low in August, but not nearly as much as its competitors.
Intel may be the behemoth of chip makers, but don’t count out Qualcomm Inc. (NASDAQ: QCOM).
The company calls its division the Internet of Everything, and is focusing on building new chips for cars, homes, wearables, education and more.
It’s going for a diverse strategy with its chips that will likely leave it leveraged to take advantage of the next big opportunity in the IoT space.
Its stock, too, hit a low this year and has improved substantially since September.
The company is also pushing a new chipset that control basic things in your home, such as lightbulbs and ovens, and expects them to account for 10 percent of its revenue in the upcoming year.
ARM Holdings plc (NASDAQ: ARMH), which makes many lower-priced PC chips, is also fighting to get in on the IoT revolution.
ARM teamed with IBM in September, and will now use IBM’s leading cloud service for its data.
The move has joined two of the biggest in the space, and its stock, too, has seen its price rise.
ARM beat Qualcomm and Intel to the mobile space once; its chips power 95 percent of smartphones already.
The IoT world is huge. Many of the companies designing devices are simply startups counting on Google or Apple to buy them and their clever devices.
If you’re not into stock picking and still want to be a part of the IoT market, one ETF has you covered…
The PowerShares NASDAQ Internet ETF (PNQI) is the only ETF to follow the IoT market almost exclusively. It’s loaded with stocks you know, such as Alphabet, Verisign, Homeaway and Facebook—all companies that are building on the IoT market.
It’s also beating the market. Last year at this time, it was trading at just about $55. Today, it’s nearing $80 as the IoT market heats up.
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