The coronavirus pandemic is clearly a curveball equity investors weren’t expecting this year, but amid the carnage and volatility, some thematic investments are strutting stuff. Count cloud computing ETFs, including the Global X Cloud Computing ETF (Nasdaq: CLOU), among that group.
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 distribution infrastructure and/or hardware components used in cloud and edge computing activities.
CLOU, which tracks the Indxx Global Cloud Computing Index, is up almost 20% this year and has recently been on a torrid pace, setting a string of new all-time highs.
“An unplanned, widespread move to home-working would have brought businesses to a grinding halt had large investments in cloud computing not been made over the last ten years,” said GlobalData in a recent report. “GlobalData forecasts that the cloud services market will be worth $661bn by 2024, having grown at a compound annual growth rate (CAGR) of 19% between 2019 and 2024.”
Forecast Calls for CLOU
Declining costs in cloud adoption and increasing ease of use are among the factors driving the cloud computing boom. Several of CLOU’s marquee components have first-mover advantages in various cloud niches and are building attractive competitive moats in the space. CLOU’s IaaS exposure should beneficial to long-term investors.
“The shift to remote working caused by the pandemic has left offices empty and pushed companies to rely on technology to keep their operations running. Cloud services suppliers have had to step up and bear the brunt of a transformed business landscape,” said GlobalData analyst David Bicknell.
The increasingly digital and connected world that forms the backdrop for CLOU’s launch is exhibiting significant growth and is expected to continue to grow over the coming years. The cloud computing industry that was estimated to be worth $188 billion in 2018 is expected to be worth over $300 billion by 2022, a nearly 15% annualized growth rate.
The work from home trend foisted upon Americans by COVID-19 is also bolstering the case for CLOU.
“The home-working genie is now out of the bottle. The rush-to-remote is now driving change in the way businesses to operate,” said Bicknell. “Companies that would scarcely have countenanced the idea of their employees working from home have been forced to rethink their opposition and sanction the use of cloud-based tools like Slack and Zoom for collaboration.”
For more on thematic ETFs, please visit our Thematic Investing Channel.
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.