Cloud Computing ETF in the Green, but Headwinds Remain

The cloud computing industry is riding the wave of tech’s comeback in 2023, putting the Daily Cloud Computing Bull and Bear 2X Shares ETFs (CLDL) in the green year-to-date, but headwinds do remain for the sector heading into the mid-point of 2023.

Last year, inflation fears and rising interest rates perpetuated a gloomy forecast for the technology sector. As such, in an effort to curb costs, tech firms reduced the workforces they accumulated during the height of the pandemic.

In turn, that also cast a cloud (pun intended) over the cloud computing sector, but as big tech appears to be weathering the storm, things have turned for the better in 2023. The cloud computing sector is benefitting from the reduced costs with better bottom-line numbers, but challenges do remain in terms of sustaining the growth moving forward.

“The cloud-computing market keeps growing as companies move an increasing number of workloads out of their own data centers, but executives from the leading cloud vendors said this week that clients are looking for ways to trim costs,” CNBC noted in a report discussing the top cloud computing players like Amazon and Microsoft — both of which reported their earnings, including revenue from cloud computing.

CLDL is up about 8% for the year, but short-term traders have to be wary of the long-term prospects of cloud computing. Among the big tech firms involved in the cloud space is Google, which saw its cloud growth come in at 28% from a year earlier in the first quarter versus 32% in the same timeframe last year.

“We saw some headwind from slower growth of consumption with customers really looking to optimize their costs given that macro climate,” said Ruth Porat, Alphabet’s finance chief.

“We are leaning into optimization,” Porat said further. “This is an important moment to help our customers, and we take a long-term view. And so it’s definitely an area we are leaning in and trying to help customers make progress on their efficiencies where we can.”

Get Bullish With Double Leverage

Despite short-term obstacles, growth prospects point to positive numbers in the long term, according to Grand View Research.

“The global cloud computing market was valued at USD 483.98 billion in 2022 and is expected to expand at a compound annual growth rate (CAGR) of 14.1% from 2023 to 2030,” the research firm noted.

As recession fears quiet down and the Fed gets more dovish, this could also help tech further in the short term. As such, CLDL could benefit from this macroeconomic tailwind in the interim.

The fund seeks 200% of the daily performance of the Indxx USA Cloud Computing Index, which is designed to track the performance of companies that are delivering cloud infrastructure, platforms, and services. That double dose of exposure can help traders looking to maximize profit potential with their bullish notions on the sector.

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