Certainly, there are plenty of options when it comes to tech investing. From the Internet of things, to startups, to blue-chip stocks like Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT), investors likely learn about something new every minute — and cloud stocks are no exception.
The rise of cloud computing is an important trend in tech investing. For the uninitiated, cloud based services allow data and applications to be accessed via the Internet and stored remotely via large data centers.
This encompasses things like software as a service (SaaS), infrastructure as a service (IaaS), platform as a service (PaaS) business intelligence and data storage. One common example of a cloud stock is Salesforce.com (NYSE:CRM), an online customer relationship management system. With that in mind, here the Investing News Network (INN) looks at how investing in cloud stocks may be the way to go.
While there are still some concerns over security, cloud computing is definitely here to stay. It allows businesses to save big on hardware and infrastructure costs while allowing easy access to information from anywhere with an internet connection – both key factors for quick moving industries.
To be sure, something that provides cost savings is nothing to shake a stick at when it comes to running a business, which explains why so many organizations continue to choose the cloud.
Though it’s been around for awhile now, the cloud computing industry is still rapidly growing. According to Forbes, the cloud computing market is expected to increase at a compound annual growth rate of 19 percent between 2015 and 2020–or a rise from $67 billion in 2015 to $162 billion in 2020.
Most of the biggest tech stocks have made moves in the cloud computing space as well. Meanwhile, Nasdaq reported in early 2015 that IBM (NYSE:IBM) was stepping up its efforts to get a piece of the cloud computing market after cloud stock revenues increased 60 percent year-over-year for 2014. Now, IBM’s cloud services range from cloud managed services, cloud for SAP, cloud for Oracle, cloud managed security services, and cloud managed services for System z. That said, the company’s stock has declined roughly 7 percent over a one-year basis as it makes the transition to cloud and artificial intelligence, although the company is positive that it’s only a temporary blip.
“The portfolio will grow. I am confident that the IBM company will grow again,”Martin Schroeter, IBM’s chief financial officer told CNBC. “We’re taking time to make sure we invest in the right places and make sure we get the kind of margin high-value profile we’re looking for.”
Other giants such as Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOGL) and Microsoft are all “pouring billions of dollars into data centers, equipment and software to expand their cloud-services businesses,” the Wall Street Journal noted. In 2016 alone, for example, Amazon’s cloud computing reached a whooping $12 billion in revenue and $3 billion in profit.
There are a number of different ways to invest in cloud stocks. The first and most obvious choice would be companies offering software as a service, as this is the largest cloud-based sector.
However, Investopedia lists several other ways to gain exposure to the sector, including investing in companies like Websense that offer cloud-based security solutions, or investing in companies like Dropbox that offer online storage. Taking it a step further, companies like VMware offer virtualization technology.
In addition, investing in cloud computing ETFs is another way to go–especially for investors who are interested in a commodity or market as a whole, rather than a single company. That said, according to ETFdb.com, there is currently only one cloud computing ETF: the First Trust ISE Cloud Computing Index Fund (BMV:SKYY), incepted on July 6, 2011. The fund currently tracks 31 holdings, including cloud giants such as: Oracle (NYSE:ORCL), Red Hat (NYSE:RHT) and Teradata (NYSE:TDC).
Finally, investors interested in the cloud can also look at investing in the infrastructure needed to run the cloud – centralized data centers.
As mentioned above, a number of tech heavyweights are continually increasing their investment in in building new data centers and expanding their footprint in the cloud computing market.
In any case, it’s clear to see that the overall cloud stocks sector is only growing, and anyone looking to invest in new technology may just want to keep an eye on things in this space.
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This is an update to an article originally published in 2015.
Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.