The world was moving online even before Covid, but the changes brought about by the pandemic have fast-tracked the shift towards work and leisure activities being based around firms that host, manage, and analyse data. With the total number of customers and each customers usage increasing rapidly, many have already made significant returns out of their decision to buy data stocks. Taking profits is never a bad idea, but faced with the question, data stocks, buy or sell? There are strong reasons to expect the trend to continue upwards.
The big data market was worth $208bn in 2020 and is expected to reach $450bn by 2026. Few other sectors offer this type of growth and using technical and fundamental analysis to pick the right stock, and the right broker for the strategy are the first steps to successfully investing in data stocks.
Best Data Stocks – The Shortlist & Picks
Each of these companies plays a crucial role in the data ecosystem, whether through cloud services, data analytics, AI, machine learning, or database management. They are all central to the modern data-driven economy, offering tools and platforms that enable businesses to harness the power of data for strategic advantage.
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Big Data Analytics
No list of data companies would be complete at the moment without Palantir. Palantir’s stock (NASDAQ: PLTR) has seen growth of more than 350% through 2024, which truly stands out as a leader in the data sector.
Specializing in big data analytics, Palantir has developed platforms like Gotham and Foundry, which are extensively used by government agencies and private enterprises for data integration and analysis. The company has recently enhanced its secure cloud computing services, achieving a higher federal government rating, which enables it to process the most sensitive unclassified workloads.
Operationally, the firm has delivered significant revenue growth and plenty of new strategic partnerships. In the fourth quarter of 2023, the company reported a 20% year-over-year revenue increase, reaching $608 million, and achieved its fifth consecutive quarter of GAAP profitability with a net income of $93 million. For the full fiscal year 2023, Palantir’s revenue grew 17% to $2.23 billion, with a GAAP net income of $210 million.
Strategically, Palantir has expanded its footprint in the defense sector through collaborations with entities like Booz Allen Hamilton, aiming to modernize U.S. national defense infrastructure. The company also enhanced its secure cloud computing services, achieving a higher federal government rating, which enables it to process the most sensitive unclassified workloads. In recent months, the company has really expanded it’s commercial partnerships with businesses outside of defense, reducing some of the previous revenue concentration.
Big Data Stock
Microsoft has an established business model, deep pockets to fund investment in new schemes, and a range of complimentary business lines which make it an obvious option for investors looking to buy big data stocks. Microsoft’s stock (MSFT) has added 20% in a steady year, bringing the market cap up to an impressive $3.3 trillion.
Microsoft’s global wide-area network (WAN) connects hundreds of data centers in regions around the world and appears well equipped to build out extra capacity and develop market share.
Microsoft’s data business is primarily through its Azure cloud platform, offering a comprehensive range of data management and analytics services. Microsoft is a leader in cloud computing, AI, and business intelligence, providing tools for data warehousing, big data, and machine learning.
Another reason why Microsoft is regarded as one of the best data center stocks to buy is the firm has future-proofed itself against two challenges which face the industry. The first is the risk that the energy used by big data becomes a politically sensitive issue.
Microsoft Azure is up to 98% more carbon efficient than using a traditional enterprise data center. The second relates to technical innovation and the firm’s Azure HDInsight cloud platform can run on several popular open-source frameworks including Apache Spark, Apache Hive, Apache Kafka, Apache Storm and Hadoop.
Data Management Stock
Datadog’s operations focus on helping clients get the best results from the extensive data they already own. Tje Datadog stock price has added more than 46% on the year, with bullish momentum continuing to hold firm.
The Datadog APM & Continuous Profiler product offers deep visibility into web services, queues, and databases and monitors requests, system errors, and latency.
Datadog specializes in cloud monitoring and analytics. Its platform integrates and automates infrastructure monitoring, application performance monitoring (APM), and log management to provide real-time insights into data across an organization’s IT stack.
Clients can get the most out of their data as Datadog helps them unify and automate network monitoring, application performance analysis, log management, and security management. With the amount of data each firm amasses forecast to balloon in size, being able to use it as effectively as possible appears to be a high priority, and Datadog can help with that.
Quantum Computing
Nvidia, traditionally known for its GPUs, has expanded into data-centric fields, particularly AI, machine learning, and data processing. Nvidia’s hardware accelerates data analytics, deep learning, and high-performance computing workloads, making it a critical player in AI and data science.
The technology around quantum computing is still in development but is getting closer to becoming a major part of the big data sector. At the point when quantum computing becomes widely available on a commercial scale there is likely to be a realignment in terms of which firms look likely to be long-term winners and losers.
Nvidia has built relationships with the industry’s big players, including Google Quantum AI and IBM who use Nvidia’s Cuda-Q software development kit to accelerate their own quantum computing work.
Just this month (Dec 24), D-Wave (QBTS) have highlighted their expertise in quantum annealing, and being the first pure quantum computing company to market. The firm showcased real-world quantum computing applications at the Q2B24 Silicon Valley conference that can solve data-intensive challenges across multiple sectors far more efficiently than classical computing. With time, D-Wave could prove to be a big winner in the sector as far as annealing firms.
There are a few other names in the quantum sector that have been delivering huge gains in recent months, but much remains in the R&D phase at the present time.
Data Transformation for AI
Innodata Inc. (NASDAQ: INOD) is a global data engineering company specializing in data transformation solutions for artificial intelligence (AI) and machine learning (ML) applications. The company offers a comprehensive suite of services, including data collection, annotation, and AI model training, catering to various industries such as finance, healthcare, and legal sectors.
With all the interest in the sector, INOD has gained more than 450% through 2024, but with a market cap of just $1.30 billion, is significantly smaller than many of it’s competitors.
While Innodata delivers data services that can support defense-related AI applications, it does not specialize exclusively in the defense sector. In contrast, companies like Palantir focus more directly on defense and intelligence sectors, offering platforms tailored for military and governmental use.
In the realm of AI, Innodata provides generative AI solutions aimed at optimizing model responses and ensuring safety and compliance across diverse domains. Their services encompass supervised fine-tuning, human preference optimization, and rigorous model safety evaluations, which are crucial for developing robust AI systems.
Other Notable Data Sector Names
IBM (IBM) – one of the global leaders in data solutions, IBM offers a comprehensive suite of data management, analytics, AI, and cloud services. IBM’s data business is centered around its hybrid cloud platform and AI capabilities, helping enterprises manage and analyze vast amounts of data. The stock trades on the New York Stock Exchange under ticker IBM and has gained more than 30% over the past 12 months.
Snowflake (SNOW) – a cloud-based data warehousing company that enables organizations to manage and analyze large-scale data sets in a cost-effective, scalable manner. It is known for its ability to handle structured and semi-structured data seamlessly. Snowflake stock (NYSE: SNOW) has had a difficult 12 months, losing more than 15% over the year.
Amazon – Amazon Web Services (AWS) is the cloud computing arm of Amazon, offering a broad range of data-related services, including data storage, databases, analytics, machine learning, and big data processing. AWS is a dominant player in cloud infrastructure and data management.
Splunk (CSCO) – Splunk specializes in data analytics, particularly in machine data and big data analysis. The company’s platform helps organizations monitor, search, analyze, and visualize machine-generated data in real-time, which is crucial for IT operations, security, and business intelligence.
Acquired in 2024 – The stock previously traded on the NASDAQ under ticker SPLK before being acquired by Cisco earlier this year for a deal close to $28 billion. If you wanted to gain access to Splunk from within Cisco, the stock trades under ticker NASDAQ: CSCO. Over the past year, Cisco stock is down close to 20%, so looking for a shift in sentiment may be the sensible play here for the bull.s
MongoDB (MDB) – known for its NoSQL database, which allows for the storage and management of large amounts of unstructured data. It is widely used for applications that require scalability, flexibility, and fast querying. MongoDB stock price (NASDAQ: MDB) has fallen almost a 1/3rd over the past year.
Why Invest in Data Stocks?
Global work and leisure patterns are always changing, but the Covid pandemic accelerated the process considerably. The rapid increase in value of some data stocks gave a hint of what might be possible. In the two years between July 2018 and July 2020 Alteryx stock shot up in price by 367%
There appears little reason to think the trend towards big data is going to slow down, let alone change course. Picking the right stock which manages to make the most of the situation isn’t easy as there are a lot of contenders to consider. But building a balanced portfolio of strong candidates could mitigate single stock risk and open the door to long-term financial gains.
What to Know Before Investing in The Data Sector
Choosing between small-cap and large-cap data stocks appears to be a key consideration. With a blend of the two likely to balance out returns. The market giants such as Microsoft which started out as small operations now have such firepower that incomers need to have a very special competitive advantage to break down the considerable barriers to entry.
Disruptor stocks which do thrive are likely to become take-over targets of the bigger firms but given a premium would have to be paid this should ultimately be good news for shareholders.
One more factor to consider is that buying data and data center stocks can be a long-term proposition. Funds tied up in buy-and-hold positions can’t be used elsewhere so investors need to factor in the opportunity cost of investing in the sector.
