Cloud stocks are stories unto themselves this year, a theme benefiting various ETFs, including the Global X Cloud Computing ETF (Nasdaq: CLOU).
Tracking the Indxx Global Cloud Computing Index, the fund holds a basket of companies that potentially stand to benefit from the continuing proliferation of cloud computing technology and services. The cloud computing industry refers to companies that (i) license and deliver software over the internet on a subscription basis (SaaS), (ii) provide a platform for creating software applications which are delivered over the internet (PaaS), (iii) provide virtualized computing infrastructure over the internet (IaaS), (iv) own and manage facilities customers use to store data and servers, including data center Real Estate Investment Trusts (REITs), and/or (v) manufacture or distribute infrastructure and/or hardware components used in cloud and edge computing activities.
A recent spate of high-profile activity for cloud computing initial public offerings confirms ongoing enthusiasm for cloud investments.
“Five more cloud software companies filed for initial public offerings (IPOs) on August 24. Unity Software, which offers a cloud-based video game development platform where 50% of the Apple App Store’s top 1,000 were born, filed for an NYSE listing,” according to Global X research.
CLOU Looks Good for the Long-Term
Cloud computing represents a significant source of disruption not only in the technology sector but in the investment world as well. It has become ingrained in nearly every aspect of our lives by fundamentally altering how we consume, process, and share information in the digital age. The trend toward cloud-based solutions offers a compelling, long-term opportunity for investors to gain exposure to a quickly developing segment of the technology sector.
While private and public businesses have made the pivot to a heavier reliance on cloud computing amid the Covid-19 pandemic, government organizations are following in tow. As such, more adoption by local and federal governments could spur cloud computing ETFs, such as CLOU.
Growth is pivotal at a time when some market observers see valuations on the broader cloud space as somewhat rich.
Data confirm cloud companies are striking while the iron is hot.
“So far this year, 18 software companies have gone public, raising a total of $5.5 billion of capital. As of August 24, those names were up 91% from their offer price in weighted average terms,” according to Global X.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.