Investing in the Internet of Things (IoT): 2025 Outlook, Key Players & Strategic Insights
Comprehensive research report – prepared 26 June 2025
1. Executive Summary
The Internet of Things (IoT) is transitioning from buzzword to business imperative. IDC projects that the number of connected devices will surpass 55 billion by 2028, generating over 80 zettabytes of data annually. This data‑rich environment is spawning new revenue streams across hardware, software, connectivity and analytics. Investors who understand the evolving ecosystem can capture value across multiple layers of the stack.
2. Market Size & Growth Trajectory
3. Core Segments & Representative Companies
4. Growth Catalysts
5. Security Imperatives
IoT introduces a vastly expanded attack surface. Gartner estimates that 20% of organizations experienced at least one IoT‑based breach in 2024. Best‑in‑class vendors integrate zero‑trust principles, secure boot, hardware‑rooted keys and continuous device posture monitoring.
6. M&A & Funding Trends
7. Valuation Considerations
While headline multiples can appear stretched, high gross margins (60%+) and long‑duration growth justify premium pricing for category leaders. Investors should focus on unit economics, TAM expansion and ecosystem lock‑in rather than near‑term earnings.
8. Risk Factors
9. Portfolio Strategy
10. Conclusion
IoT is reshaping entire industries, from manufacturing to healthcare. As connectivity becomes ubiquitous, value creation will migrate from hardware to data‑driven services and AI‑powered insights. A balanced approach that spans chips, connectivity, platforms and security offers the most resilient path to capturing this multi‑trillion‑dollar opportunity.
Disclosures: The author holds positions in NVDA, CRWD and SNSR at the time of writing. This material is for informational purposes only and is not investment advice.
Comprehensive research report – prepared 26 June 2025
1. Executive Summary
The Internet of Things (IoT) is transitioning from buzzword to business imperative. IDC projects that the number of connected devices will surpass 55 billion by 2028, generating over 80 zettabytes of data annually. This data‑rich environment is spawning new revenue streams across hardware, software, connectivity and analytics. Investors who understand the evolving ecosystem can capture value across multiple layers of the stack.
2. Market Size & Growth Trajectory
- Global IoT spending is expected to reach $1.1 trillion in 2026, up from $805 billion in 2023.
- Industrial IoT (IIoT) leads with a 20% CAGR, driven by predictive maintenance and digital twins.
- Consumer IoT remains robust as smart‑home penetration climbs above 40% in developed markets.
- Edge computing spend is accelerating at 18% CAGR as latency‑sensitive applications proliferate.
3. Core Segments & Representative Companies
| Layer | Ticker | Focus Area | Fwd EV/S | Notes |
|---|---|---|---|---|
| Semiconductors | NVDA | AI edge chips | 23.1 | Jetson platform dominates robotics |
| Connectivity | QCOM | 5G modems & RF | 6.4 | Wins in automotive telematics |
| Platforms | AMZN | AWS IoT Core | 3.2 | Serverless device management |
| Security | CRWD | IoT endpoint protection | 17.4 | Falcon Discover for IoT |
| Industrial | GE | Predix & digital twins | 2.1 | Focus on power & aviation assets |
| Smart Home | AAPL | HomeKit ecosystem | 6.7 | Matter standard adoption |
4. Growth Catalysts
- 5G & Wi‑Fi 7 Rollout: Higher bandwidth unlocks real‑time applications like autonomous drones.
- AI at the Edge: On‑device inference reduces cloud costs and latency.
- Regulatory Push: EU Cyber Resilience Act mandates security‑by‑design for connected products.
- Sustainability Goals: Smart‑grid and smart‑building deployments cut energy consumption by up to 30%.
5. Security Imperatives
IoT introduces a vastly expanded attack surface. Gartner estimates that 20% of organizations experienced at least one IoT‑based breach in 2024. Best‑in‑class vendors integrate zero‑trust principles, secure boot, hardware‑rooted keys and continuous device posture monitoring.
6. M&A & Funding Trends
- Strategic buyers are acquiring sensor makers to secure supply chains (e.g., Siemens‑Heliot acquisition).
- Private‑equity interest is rising in connectivity management platforms with recurring SaaS revenue.
- SPAC activity has cooled, but late‑stage funding rounds for AI‑edge startups remain strong.
7. Valuation Considerations
While headline multiples can appear stretched, high gross margins (60%+) and long‑duration growth justify premium pricing for category leaders. Investors should focus on unit economics, TAM expansion and ecosystem lock‑in rather than near‑term earnings.
8. Risk Factors
- Fragmented Standards: Lack of interoperability can slow enterprise adoption.
- Supply‑Chain Constraints: Chip shortages may delay hardware rollouts.
- Regulatory Scrutiny: Data‑sovereignty laws could limit cross‑border analytics.
- Security Breaches: High‑profile attacks can erode consumer trust and trigger recalls.
9. Portfolio Strategy
- Core Exposure: Broad ETFs like Global X Internet of Things ETF (SNSR) for diversified coverage.
- Growth Tilt: Overweight semiconductor and edge‑AI leaders (NVDA, AMD).
- Defensive Hedge: Pair with cybersecurity names (PANW, CRWD) to mitigate breach risk.
- Income Play: Utilities deploying smart‑grid tech (NEE, DUK) offer dividend stability plus IoT upside.
10. Conclusion
IoT is reshaping entire industries, from manufacturing to healthcare. As connectivity becomes ubiquitous, value creation will migrate from hardware to data‑driven services and AI‑powered insights. A balanced approach that spans chips, connectivity, platforms and security offers the most resilient path to capturing this multi‑trillion‑dollar opportunity.
Disclosures: The author holds positions in NVDA, CRWD and SNSR at the time of writing. This material is for informational purposes only and is not investment advice.