With the 5G and cloud infrastructure landscapes rapidly expanding, investors may want to do away with burdensome stock-picking and consider an umbrella approach with the First Trust ISE Cloud Computing Index Fund (NasdaqGM: SKYY).
SKYY, the original dedicated cloud computing exchange traded fund, tracks the ISE Cloud Computing Index (CPQ) and provides exposure to multiple cloud growth stories, including Infrastructure-as-a-Service, Platform-as-a-Service, and Software-as-a-Service companies.
SKYY eases another frequent burden of investing in the sector: understanding the complexities of the 5G and cloud infrastructure industries.
“With such high growth, there is great potential for investors to capitalize on digital infrastructure advances enabled by both 5G and cloud. To find the winners, investors must first understand exactly what digital infrastructure encompasses,” notes Morningstar analyst Lauren Solberg.
Infrastructure-as-a-Service (IaaS) companies provide the computing infrastructure, delivered over the Internet, that enables other firms to build services more efficiently. It helps scale computing demand and avoid the high expenses and complexity of buying and managing infrastructure.
Today, IaaS may not be as well known as its SaaS counterpart, but the former is increasingly prominent part of the tech infrastructure landscape.
“Companies that provide 5G connectivity and IaaS are most likely to enjoy significant economic benefits as the underlying technologies gain adoption,” says Solberg. “Firms with high exposure to the 5G theme sell processing and networking hardware or provide 5G data services. Firms with high exposure to cloud infrastructure either rent out server capacity or directly support cloud vendors.”
Arista Networks (NASDAQ: ANET), SKYY’s fourth-largest holding, is an example of an individual name benefiting from the trends highlighted by Solberg.
The company “supplies software and hardware that powers networks for hyperscale cloud data centers, service providers, and large enterprises,” she writes. “Arista is a key player in data center networking and achieves its narrow Morningstar Economic Moat Rating through its software prowess and codeveloped customer solutions. Morningstar believes that Arista is well-positioned as networks transition to faster speeds and densify.”
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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.