Cloud computing is the future, and it’s leaving older technology in the dust.
Cloud computing was a $371 billion market in 2020, and it’s expected to swell all the way up to $832 billion by 2025. Even better, it can make investors some serious, down-to-earth profits.
Cloud technology is used to increase storage space, offer web hosting on the internet, store important encrypted data and provide business analytics.
If that sounds like gobbledygook, here’s another way to look at it: Cloud computing delivers computer services on demand and over the internet without a big hardware investment. These services range from applications to storage and processing power.
Not all cloud offerings are the same, and there are three main infrastructure models. Public cloud is where functions are performed over the internet, private cloud is for a company’s internal utilization and hybrid cloud uses both types.
90% of companies rely on cloud technology, and, by the end of this year, 94% of will use cloud data centers.
Data centers in the cloud are rendering traditional brick-and-mortar data centers obsolete because they’re more cost effective and provide access remotely from anywhere.
The pandemic helped accelerate adoption, as businesses were forced to accommodate work-from-home if they wanted to survive. Easy access to data became essential in a remote-working environment, and it will remain crucial moving forward.
The biggest companies in the world know where the future is going, and they’re betting on cloud computing.
Azure, Microsoft Inc.’s (Nasdaq: MSFT) cloud business, grew 50% over the last quarter and brought in $14.6 billion in revenue. This accounted for 34% of the tech giant’s $43.08 billion second-quarter revenue.
Jeff Bezos is retiring as CEO of Amazon Inc. (Nasdaq: AMZN), and his successor Andy Jassy ran Amazon Web Services (AWS) since its launch.
AWS is Amazon’s most profitable segment, accounting for just 10% of total revenue but a large part of its net income.
Cloud computing is an especially desirable industry because of its robust margins. Microsoft saw its gross margin from commercial cloud operations increase from 67% to 71% last quarter.
Here are three ETFs that you can use to profit from the future of cloud computing and data storage.
Pick 1. Global X Cloud Computing ETF (Nasdaq: CLOU)
This ETF looks to track the performance of the Indxx Global Cloud Computing Index. Of the 36 total holdings, the top three include Zscaler, Inc. (Nasdaq: ZS), Shopify Inc. (NYSE: SHOP) and Twilio Inc. (NYSE: TWLO).
CLOU is focused on taking advantage of consistently surging adoption. It has an expense ratio of 0.68% and $1.6 billion assets under management (AUM).
Pick 2. First Trust Cloud Computing ETF (Nasdaq: SKYY)
SKYY seeks exposure to three different business models with varying functions. Companies’ services must fit into either Platform as a Service (PAAS), Software as a Service (SAAS) or Infrastructure as a Service (IAAS).
They can fit into multiple categories, and a rating process of fit determines individual stock weightings. Some of this ETF’s top holdings include Kingsoft Cloud Holdings Ltd. (Nasdaq: KC), MicroStrategy Inc. (Nasdaq: MSTR), and Alphabet Inc. (Nasdaq: GOOGL). SKYY’s expense ratio is 0.6%, and it has $6.9 billion in AUM.
Pick 3. WisdomTree Cloud Computing ETF (Nasdaq: WCLD)
This ETF tracks the BVP Nasdaq Emerging Cloud Index. WisdomTree touts this investment vehicle as a way to replace or augment exposure to traditional information technology investments. It’s a more targeted approach that focuses on high-growth technology with typically excellent margins.
The fund aims for equally weighted positions after rebalancing, but its current top three holdings are Sprout Social, Inc. (Nasdaq: SPT), Cloudflare, Inc. (NYSE: NET) and Crowdstrike Holdings, Inc. (Nasdaq: CRWD). WCLD has an expense ratio of 0.45% and $1.5 billion AUM.
Which Fund to Choose?
These are three good funds, and I’ll be happy to recommend any of them to my subscribers from time to time.
Which one is right for you? You can look deeper into fundamentals. You could also draw some conclusions from the past performance …
Over the past three months, WCLD and SKYY outperformed, up 32.62% and 29.44%, respectively. CLOU is up 20.48%, which still isn’t bad. Heck, it’s DOUBLE THE 10.13% performance of the S&P 500 over the same time frame.
Each of these funds provides unique exposure to the rapidly growing cloud computing industry, and they offer the chance to profit from the priorities of the world’s most influential technology giants.
All the best,