As businesses navigate the complexities of data ownership and security, cloud solutions are increasingly becoming a sought-after alternative, surpassing the limitations of traditional providers. This trend is further energized by rapid advancements and integration of artificial intelligence (AI) that drive innovation in cloud services. The dual efforts in both public and private cloud services are fostering substantial growth and presenting formidable investment opportunities, particularly in cloud exchange-traded funds (ETFs). More industries incorporate cloud infrastructure, and the demand for scalable, efficient data management continues to rise.
Cloud ETFs, focused on companies leading the digital revolution through infrastructure, software, and platforms, are primed for significant growth. This prediction is supported by the escalating adoption of AI capabilities and a heightened focus on data security. Investors needing an entry into this burgeoning sector should look at three prominent cloud ETFs: Global X Cloud Computing ETF (CLOU), WisdomTree Cloud Computing Fund (WCLD), and First Trust Cloud Computing ETF (SKYY). Each of these funds showcases unique attributes and strong potential for impressive returns as the cloud computing industry continues to expand.
Global X Cloud Computing ETF (CLOU)
The Global X Cloud Computing ETF (CLOU) is ingeniously managed by Global X Management Company LLC and strategically invests in global public equity markets. This fund targets stocks of companies operating in the realms of Software as a Service (SaaS), Platform as a Service (PaaS), and Infrastructure as a Service (IaaS) sectors. Additionally, it includes investments in managed server storage, data center Real Estate Investment Trusts (REITs), and cloud as well as edge computing infrastructure. CLOU seeks to balance growth and value stocks across various market capitalizations and is meticulously designed to track the performance of the Indxx Global Cloud Computing Index through a comprehensive replication technique.
With a compelling asset under management (AUM) of $381.90 million, CLOU’s top holdings are pivotal industry players such as Snowflake, Inc. (SNOW) with a 4.81% weighting, Shopify, Inc. (SHOP) at 4.79%, and Twilio, Inc. (TWLO) at 4.63%. The fund encompasses a total of 38 holdings and carries an expense ratio of 0.68%, which is slightly above the category average of 0.58%. The current Net Asset Value (NAV) of CLOU is positioned at $25.12, despite experiencing fund outflows of $13.93 million over the past month. Notably, CLOU has demonstrated significant growth, with an appreciation of 27.2% over the past three months and 32.1% over the past six months, closing the last trading session at $25.38. CLOU’s impressive POWR Ratings, calculated based on 118 different factors, underscore a promising outlook with an overall rating of A, equating to a Strong Buy.
WisdomTree Cloud Computing Fund (WCLD)
The WisdomTree Cloud Computing Fund (WCLD) was launched by WisdomTree, Inc. and managed in collaboration with Mellon Investments Corporation. Like the Global X Cloud Computing ETF, this fund invests in global public equity markets with a focus on stocks within the cloud computing sectors. WCLD balances growth and value stocks across various market capitalizations while incorporating socially conscious companies promoting environmental responsibility. This fund aims to track the performance of the BVP Nasdaq Emerging Cloud Index using a representative sampling technique to meticulously select its investments.
WCLD boasts $533.50 million in AUM and includes a total of 65 holdings. Its top holdings comprise Twilio (TWLO) with a 2.24% weighting, Asana, Inc. (ASAN) at 2.22%, and Atlassian Corp. (TEAM) with 2.19%. In comparison to its counterparts, WCLD stands out with a lower expense ratio of 0.45%, which is below the category average of 0.58%. It currently has a NAV of $39.92 and has experienced fund inflows amounting to $20.36 million over the past month. Remarkably, WCLD has reported substantial gains of 34.4% over the last six months and 30.3% over the past three months, closing the previous trading session at $40.64. Similar to CLOU, the WCLD’s robust performance and optimistic future outlook are evidenced in its POWR Ratings, awarding it an overall rating of A, translating to a Strong Buy.
First Trust Cloud Computing ETF (SKYY)
The First Trust Cloud Computing ETF (SKYY), led by First Trust Advisors LP, offers another promising investment option in the realm of cloud computing ETFs. SKYY is designed to target companies in information technology, software, IT and internet services, infrastructure, data management, storage, hardware, and platforms for software creation through virtualization or middleware delivered online. This fund follows the trend of incorporating both growth and value stocks across diversified market capitalizations. It aims to replicate the performance of the ISE CTA Cloud Computing Index using a full replication technique.
SKYY possesses an impressive $3.85 billion in AUM and encompasses 64 holdings. Its top holdings feature industry heavyweights such as AppLovin Corp. (APP) with a 5.27% weighting, Amazon.com, Inc. (AMZN) with 3.84%, and Arista Networks, Inc. (ANET) with 3.84%. Despite its higher expense ratio of 0.60% compared to the category average of 0.58%, SKYY has exhibited substantial performance with a year-to-date gain of 45% and a remarkable annual increase of 46.5%, closing the last trading session at $127.16 with a NAV of $125.38. Although SKYY has faced fund outflows of $110.84 million over the past month, its positive outlook and future potential are well-supported with an overall POWR Rating of A, equating to a Strong Buy.
The article revolves around the considerable growth potential of cloud computing ETFs, driven by significant investments in cloud technology for flexibility and growth, complemented by innovations fueled by AI. As businesses progressively enhance their technology infrastructure, global public cloud spending is projected to grow substantially, anticipated to reach $675.40 billion in 2024, with the overall cloud computing market expected to achieve $945 billion by 2025.
Investment Potential in Cloud ETFs
As businesses navigate data ownership and security complexities, cloud solutions are emerging as a preferred alternative, surpassing the constraints of traditional providers. This trend is fueled by rapid advancements and AI integration, sparking innovation in cloud services. The growth in both public and private cloud arenas offers substantial investment opportunities, particularly in cloud exchange-traded funds (ETFs). As more industries adopt cloud infrastructure, the need for scalable, efficient data management is on the rise.
Cloud ETFs, which target companies at the forefront of the digital transformation in infrastructure, software, and platforms, are positioned for noteworthy growth. This outlook is bolstered by the rising adoption of AI and an increased emphasis on data security. For investors looking to enter this fast-growing sector, three prominent cloud ETFs to consider are: Global X Cloud Computing ETF (CLOU), WisdomTree Cloud Computing Fund (WCLD), and First Trust Cloud Computing ETF (SKYY). These funds each possess unique attributes and show strong potential for impressive returns as the cloud computing industry continues to expand.
