Software has always been one of the premier industry-level investment destinations in the broader technology sector, but it wasn’t that long ago that cloud computing was basically unheard of.
Obviously, that changed, and the cloud is growing in exponential fashion, bringing with it significant opportunity with exchange traded funds, including the WisdomTree Cloud Computing Fund (WCLD).
The $1.42 billion WCLD roared higher in 2020, buoyed in part by the work-from-home bonanza. Last year, WCLD surged nearly 110%. The fund scuffled a bit earlier this year as some traders speculated that working from home would die down as coronavirus cases eased, but remote work, at least for some employees, appears to be a permanent fixture.
“As we look ahead, not only are we optimistic about ongoing remote-working software usage, but we also foresee the move to remote work as accelerating digital transformation,” says Morningstar analyst Dan Romanoff. “We ultimately see spending on digital transformation growing at a 16% compound annual growth rate from 2020 to 2025, resulting in a $1.8 trillion opportunity in five years.”
WCLD is higher by 8.7% over the past month, extending its year-to-date gain to 18.5%. Those data points could be signs that there’s renewed enthusiasm for cloud equities. Going forward, more remote working could be a boon for WCLD components DocuSign (NASDAQ:DOCU) and Zoom Communications (NASDAQ:ZM).
“The explosion in remote-work enablers will evolve into the retention and expansion of those solutions to customers who have implemented them. For example, we have already seen good follow-through on customers acquired by Zoom and DocuSign during the depths of the coronavirus-driven lockdowns,” adds Romanoff.
Work from home is one catalyst for the cloud arena, but there’s much more to the story. Cloud computing is essential in modernizing today’s workplaces and is the foundation of increasing automation and efficiencies. Salesforce.com (NYSE:CRM), a member of the Dow Jones Industrial Average and one of the titans of the cloud space, sits at the forefront of lucrative automation trends. Salesforce is a WCLD holding.
“We offer Salesforce as leading the charge with its initial salesforce automation, or SFA, solution. SFA advanced customer-relationship-management software to a new level with new features and automation of repetitive tasks, thereby freeing up users to focus on their priorities: selling and generating revenue,” according to Romanoff.
Adding to the long-term allure of WCLD are impressive growth trajectories for other disruptive technologies, including artificial intelligence and big data. In fact, big data is one of the most compelling frontiers for cloud purveyors going forward.
“Based on our estimates, the AI and analytics software market was approximately $50 billion in 2020, and we expect it to increase to more than $150 billion by 2025,” concludes Romanoff.
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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.