The universe of dedicated cloud computing exchange traded funds (ETFs) doubled in size with Tuesday’s debut of the Global X Cloud Computing ETF (Nasdaq: CLOU). CLOU, the latest addition to Global X’s growing suite of thematic ETFs, targets the Indxx Global Cloud Computing Index.

Companies in the new ETF are “positioned to benefit from the increased adoption of cloud computing technology, including companies whose principal business is in offering computing Software-as-a-Service (SaaS), Platform-as-a-Service (PaaS), Infrastructure-as-a-Service (IaaS), managed server storage space and data center real estate investment trusts, and/or cloud and edge computing infrastructure and hardware,” according to Global X.

While CLOU faces competition from the established cloud ETF, which is nearly eight years old, there is no denying that CLOU came to market at a time of rapid growth and rising demand for cloud computing services and technologies.

“The global cloud computing market is estimated to be worth well-over $300 billion by 2022, up from about $188 billion today and growing at a compound annual growth rate (CAGR) of 14.6%,” according to Global X research.

The CLOU Call

The bulk of CLOU’s holdings are makers of application and systems software, both of which are integral for business as more companies move data storage and cybersecurity to the cloud.

“Cloud computing has been successful in offering companies cost-effective, scalable solutions to the various needs of the IT estate, and thereby the overall business,” said Global X. “Further, it has proven to be a critical launching pad for other emerging technologies expected to be integral to 21st century innovation, such as artificial intelligence and the internet of things. And while cloud computing is primarily a business innovation, it has had massive implications for how products and services are delivered to customers, from social media and video streaming to education platforms and gaming.”

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.

“Cloud companies, especially first movers, have and are expected to continue to benefit from economies of scale and network effects,” said Global X. “More users of the public cloud create greater demand for scale. Greater scale, in turn, implies greater cost efficiencies and barriers to entry. This dynamic should continuously enhance the value of the service, especially at the IaaS level.”

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