The pandemic has accelerated the shift to cloud computing, driving companies to adopt cloud-based applications for enhanced customer retention and digital transformation. As cloud computing shapes the future of technology, investors should consider robust tech ETFs like Global X Cloud Computing ETF Global X Cloud Computing ETF (CLOU), WisdomTree Cloud Computing Fund (WCLD), and First Trust Cloud Computing ETF (SKYY).
Investors are gravitating toward cloud computing ETFs, which target companies leading the digital revolution by providing essential cloud services like infrastructure, software, and platforms. These ETFs offer significant growth potential, capitalizing on the expanding cloud sector. According to Statista, the global public cloud computing market is set to skyrocket to $675 billion by 2024, reflecting the increasing demand.
Cloud computing offers on-demand access to IT resources, significantly lowering operating costs compared to traditional data centers and allowing businesses to scale effectively. As companies increasingly invest in cloud technology for flexibility and innovation, global spending on public cloud services is projected to rise by 20.4%, reaching $675.40 billion in 2024, up from $561 billion in 2023.
Furthermore, in September 2024, the tech market saw significant gains following the Fed's rate cuts, which reduced borrowing costs and boosted investor confidence. With access to cheaper capital, cloud computing firms can invest more in R&D, driving innovations in AI, cloud services, and other technologies.
Given this favorable backdrop, let’s evaluate the three Technology Equities ETFs picks, starting with number three.
ETF #3: Global X Cloud Computing ETF Global X Cloud Computing ETF (CLOU)
CLOU is an exchange-traded fund launched and managed by Global X Management Company LLC. It invests in the public equity markets globally. The fund invests in stocks of companies in "SaaS," "PaaS," "IaaS," managed server storage, data center "REITs," and cloud and edge computing infrastructure, focusing on both growth and value stocks across diverse market capitalizations. It seeks to track the performance of the Indxx Global Cloud Computing Index using a full replication technique.
With $340.10 million in assets under management (AUM), CLOU’s top holding Wix.com Ltd. (WIX) with a 5.65% weighting, followed by Box, Inc. (BOX), with a 4.92% weighting, and DigitalOcean Holdings, Inc. (DOCN), with 4.74%. It has a total of 36 holdings.
It has an expense ratio of 0.68%, higher than the category average of 0.58%. It currently has a NAV of $20.97. CLOU’s fund outflows came in at $18.22 million over the past month.
CLOU has gained 10.7% over the past year and 4.9% over the past month to close the last trading session at $20.97.
CLOU’s POWR Ratings reflect this promising outlook. The ETF’s overall B rating equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
CLOU has an A grade for Trade and a B for Buy & Hold. Of the 119 ETFs in the B-rated Technology Equities ETFs group, it is ranked #74. Click here to access all of CLOU’s POWR Ratings.
ETF #2: WisdomTree Cloud Computing Fund (WCLD)
WCLD is an exchange-traded fund launched by WisdomTree, Inc. The fund is co-managed by Mellon Investments Corporation and WisdomTree Asset Management, Inc. The fund invests in global public equity markets, targeting stocks of companies in the cloud computing sectors. It focuses on both growth and value stocks across various market capitalizations and includes socially conscious companies promoting environmental responsibility. WCLD seeks to track the performance of the BVP Nasdaq Emerging Cloud Index using a representative sampling technique.
With $409.10 million in AUM, the fund has a total of 66 holdings. WCLD’s top holding is DocuSign, Inc. (DOCU) with a 1.85% weighting, followed by Samsara, Inc. (IOT) with a 1.82% weighting, and Atlassian Corp. CI A (TEAM) with 1.78%.
WCLD has an expense ratio of 0.45%, lower than the category average of 0.58%. It currently has a NAV of $33.20. Its fund inflows came in at $14.56 million over the past month.
WCLD has gained 7.2% over the past month and 12.4% over the past year to close the last trading session at $33.50.
WCLD’s strong outlook is reflected in its POWR Ratings. The ETF has an overall rating of B, translating to a Buy in our proprietary rating system.
It has an A grade for Trade and a B for Buy & Hold. It is ranked #73 in the same group. To access all the POWR Ratings for WCLD, click here.
ETF #1: First Trust Cloud Computing ETF (SKYY)
SKYY is an exchange-traded fund launched and managed by First Trust Advisors LP. The fund invests in public equity markets, targeting companies in information technology, software, IT and internet services, infrastructure, data management, storage, hardware, and platforms for software creation via virtualization or middleware delivered online. It invests in both growth and value stocks across diversified market capitalizations and seeks to track the performance of the ISE CTA Cloud Computing Index using a full replication technique.
With $3.09 billion in AUM, the fund has a total of 64 holdings. SKYY’s top holding is Oracle Corporation (ORCL) with a 4.41% weighting, followed by International Business Machines Corporation (IBM) with a 4.13% weighting, and Arista Networks, Inc. (ANET) with 4.10%.
SKYY has an expense ratio of 0.60%, higher than the category average of 0.58%. It currently has a NAV of $106.27. Its fund outflows came in at $14.63 million over the past month.
SKYY has gained 22.7% over the past nine months and 37.7% over the past year to close the last trading session at $106.65.
SKYY’s strong outlook is reflected in its POWR Ratings. The ETF has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
It has an A grade for Buy & Hold, Peer, and Trade. It is ranked #13 in the Technology Equities ETFs group. To access all the POWR Ratings for SKYY, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
SKYY shares were trading at $106.90 per share on Friday afternoon, up $0.58 (+0.55%). Year-to-date, SKYY has gained 21.93%, versus a 24.08% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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