Internet Of Things Companies
Source: The Motley Fool.

The Internet of Things (or IoT) can be a particularly precarious place to invest. The IoT is still in early stages, which leaves plenty of room for volatility. But despite this, IoT's potential is too massive to ignore. Cisco estimates that by 2020, there will be 50 billion things connected to the Internet, everything from cows to computers. 

All of those connections have the potential to fuel a lot of growth in the coming years, from established tech companies and IoT pure plays alike. But jumping into IoT stocks can feel more like a leap of faith than a sound investing decision. To help you determine which stocks have the best IoT potential, here are three companies that are making big strides right now and could have huge payoffs later.

1. NVIDIA
Most investors, and gamers, know of NVIDIA's (NASDAQ:NVDA) line of GeForce graphics processors and its Tegra line of mobile processors. But the company has been expanding its technological expertise to include software for autonomous vehicles as well. 

Internet Of Things Companies
Source: NVIDIA..

At the 2016 Consumer Electronics Show (CES), NVIDIA unveiled its Drive PX 2 platform, the second iteration of its autonomous driving system. The updated platform is 10 times faster than the previous version (an important detail in the land of real-time autonomous-driving decision-making) and can already claim Volvo as its first customer. 

Autonomous vehicles will be a huge part of the Internet of Things, with an expected $42 billion market value by 2025. Of course, NVIDIA isn't the only one in the space. Google is already a leader in autonomous driving, and MobileEye is encroaching on NVIDIA's self-driving turf

But NVIDIA's head start in autonomous-driving systems could provide the company with just enough of a lead to make big gains in the space.

2. Amazon.com
I like writing about Amazon's (NASDAQ:AMZN) IoT potential because for most consumers (and even investors), Amazon doesn't immediately come to mind as an Internet of Things company. But recently Amazon has made a series of calculated steps that have moved the company deeper into the IoT space.

Internet Of Things Companies
Source: Amazon. 

Here are just a few ways Amazon's making a name in the IoT market:

  • The company launched the Dash Replenishment Service (DRS) last year, which allows companies to build an automatic ordering system into appliances. Whirlpool just debuted the first DRS appliance, which sends a mobile notification to users when laundry detergent is low and can automatically order it through Amazon's website. 
  • Amazon's Echo speaker allows users to control smart home systems via voice commands and taps into Amazon's cloud-based voice assistant, Alexa, to answer questions, set alarms, play music, access traffic reports, and more. 
  • Alexa is now open to third-party developers who want to integrate the voice-activated system into their own devices as well. This move gives Amazon more opportunities to sell its cloud services to companies. 
  • Most recently, Amazon launched AWS IoT, a cloud platform for Internet of Things devices that, the company says, "lets connected devices easily and securely interact with cloud applications and other devices." 

I think Amazon's just getting started in the IoT space, and it's likely that we'll see more expansion of the company's Internet of Things pursuits this year. 

3. InvenSense 
InvenSense
(NYSE:INVN) had a rough 2015 as its stock price plummeted 33%, but that doesn't mean the company doesn't have a bright IoT future. InvenSense makes micro-electromechanical systems (MEMS) sensors that help mobile and wearable devices track movement. The company's MEMS are found in many of Samsung's and Apple's devices, as well as in a myriad of smartwatches. 

Internet Of Things Companies

Source: InvenSense.

The company is in the process of building out its IoT offerings, and recently launched a new wearable fitness platform with integrated MEMS sensors. According to InvenSense, the platform "delivers a total solution of sensor software-related features required for a wellness/fitness-centric smart watch or activity tracker."

The new platform should make it easier for original equipment manufacturers to include InvenSense's sensors in their devices, as well as the company's FireFly sensor processors. 

In the past, InvenSense has relied too much on large tech giants for its revenue, but the company's latest moves are helping it build out its IoT offerings and diversify its revenue streams. The company's future is anything but certain, but it's clear InvenSense is moving in the right direction. 

Of course, there are plenty of other companies making big bets on the Internet of Things, but these companies are making huge strides right now, and could have big payoffs down the road. 

 

Chris Neiger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon.com, Apple, and InvenSense. The Motley Fool recommends Cisco Systems and Nvidia. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.