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Cloud Computing ETFs to Gain on the New Normal Trends

Sweta Jaiswal, FRM

The coronavirus pandemic continues to spread, having infected more than 4.3 million people globally, including at least 297,000 deaths. The outbreak has compelled people to stay indoors and work remotely. Also, the pandemic has resulted in some changes in lifestyle preferences. Even as the global economy starts to reopen in phases and social distancing restrictions are being eased, people will try to minimize the human-to-human contact. Twitter TWTR has said that its employees can keep working from home permanently if they wanted to. The company’s offices shall remain shut until at least September, except for some necessities. Meanwhile, the opening shall also be done with precautions. Other major tech firms, including Facebook FB and Alphabet GOOGL, have also extended their work from home policies through the end of the year.

In such a scenario, cloud computing’s popularity is growing and altering the way people are managing data, communication and business. Cloud computing and storage have empowered video conferencing, gaming, e-commerce shopping, remote project collaboration, online classes, editing, etc. It has also found applications in social networking, messaging apps and streaming services. Cloud computing is supporting organizations in remotely processing a lot of information, developing and running key applications and services, and helping employees across the world to work together.

In fact, going by a global CIO survey, around 79% of the polled groups aim to start using cloud technology in 2020. Moreover, per LearnBonds data, the global cloud IT infrastructure spending is projected at $69.2 billion for the ongoing year, up 3.6% year over year.

Latest Developments in Cloud Computing

Cloud computing is seeing increasing usage globally as it allows data interoperability in a scalable, cost-efficient way through data collection, processing, analyzing and sharing across platforms. Before the lockdown, companies were already discarding their own data centers to rent computing from Amazon AMZN, Microsoft MSFT and Google. However, this shift is expected to speed up now, as millions of employees are working remotely.

Microsoft recently informed about spending under $1.5 billion and about $1 billion for creating its first datacenter in Italy along with one in Poland, respectively. In February, the tech giant announced plans of opening a datacenter in Spain. Microsoft already has 60 cloud regions around the world. The company’s shift toward Internet-based computing, which includes products such as Office 365, Dynamic 365 and the flagship Azure computing platform, is paying off. Azure sales grew 59% in the fiscal third quarter, while sales of Office 365 Commercial and Dynamic 365 climbed 25% and 47%, respectively.

Another major player, Amazon recently opened a datacenter in Italy. Moreover, Amazon Web Services Inc. (AWS), division of Amazon, recently announced several major improvements in Amazon Macie like new features, greater availability worldwide and substantially reduced pricing. Per a report by Protocol, Apple AAPL, which already owns a huge cloud-based platform that includes iCloud, the App Store, Apple TV+, Apple Music, and many more, has “gone on a cloud computing hiring spree” over the last few months.

In the race, Oracle ORCL is ready to start its second cloud region in Chuncheon, South Korea, before the end of May. In this regard, the company said that “with the arrival of this second region, here in Korea, we look forward to helping more customers take advantage of this key resource locally.” In April, Zoom (ZM) collaborated with Oracle to expand its cloud business.

Cloud Computing ETFs to Shine

Here we highlight some ETFs that can gain from the growing demand for cloud computing as the coronavirus situation aggravates:

First Trust Cloud Computing ETF SKYY

The fund seeks investment results that correspond generally to the price and yield, before fees and expenses, of the ISE Cloud Computing Index. It tracks the performance of companies actively involved in the cloud computing industry. The fund holds about 65 securities in its basket, with Amazon, Microsoft, Oracle, and Google-parent Alphabet making to the top ten holdings. It has AUM of $3.56 billion and an expense ratio of 0.60%. The fund has gained around 5.5% in the year to date period (read: Twitter Promotes Permanent WFH: ETF Areas to Gain).

Global X Cloud Computing ETF CLOU

The fund seeks to invest in companies 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. The fund holds about 37 securities in its basket, having pure-play cloud companies like Zscaler (ZS) and Shopify (SHOP) holding positions in the top ten holdings. It has AUM of $584.8 million and an expense ratio of 0.68%. It has gained around 14.5% in the year to date period (read: ETFs to Gain From Lifestyle Changes Amid Coronavirus Crisis).

WisdomTree Cloud Computing ETF WCLD

The fund seeks to track the price and yield performance, before fees and expenses, of the BVP Nasdaq Emerging Cloud Index, an equally weighted Index designed to measure the performance of emerging public companies focused on delivering cloud-based software to customers. The fund holds about 53 securities in its basket, with Zoom, Cloudflare (NET) and Zscaler holding positions in the top ten holdings. It has AUM of $105.7 million and an expense ratio of 0.45%. It has gained around 21.5% in the year to date period (read: Top ETF Areas of Last Week).

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