Cloud computing is one of the hottest new tech sectors on the market today. Essentially, cloud service platforms enable companies to store data remotely and retrieve it via the internet.

Due to a massive influx of data collection and data storage, cloud infrastructure is becoming increasingly popular among businesses and organizations across all verticals. Cloud technology is rapidly becoming an essential part of how companies keep, manage and access information.

While the concept of cloud computing may seem somewhat ephemeral, the companies that provide cloud resources are corporate giants that dominate the tech industry.

Companies like Google (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN), Oracle (NYSE:ORCL), Microsoft (NASDAQ:MSFT) and IBM (NYSE:IBM) provide the corporate foundations for cloud investing, transforming this “up in the air” service into a practical business solution.

Here, the Investing News Network looks a little closer at what cloud computing is, as well as companies in the sector and what’s in store for the market.

What is cloud computing?

Those new to the technology sector may not be familiar with the term “the cloud,” but it’s actually fairly easy to understand. As PC Magazine describes it, “the cloud is just a metaphor for the Internet.”

By using the cloud, companies or people can store and access files over the internet, meaning they do not have to use a physical hard drive.

The uses of cloud computing are constantly expanding, but they can broadly be categorized as client-server computing, mainframe computing, grid/distributed computing and utility computing.

Cloud computing examples include:

• Virtual information technology that uses third party servers on a company’s network.
• Software, including commercial applications and off-site custom applications.
• Network cloud storage, which allows files to be backed up over the internet.

A specific example of a cloud service provider is Netflix (NASDAQ:NFLX), an online video-streaming service that completely eliminates the requirement for video storage on a computer, or a DVD or BluRay disc.

Web-based email is also considered a cloud computing service. Rather than using a computer-based email service such as Microsoft’s Outlook, online email services like the popular Google Workspace have become some of the largest cloud computing services.

How to invest in cloud computing

There are a number of ways for investors to jump into the cloud computing sector. Here’s a quick look at some of the options available for those with an interest in cloud computing:

• Stocks: Stocks will likely be an investor’s first choice for entering the cloud computing space. A few industry leaders (and some smaller cloud computing stocks) include: Citrix Systems (NYSE:CTXS), Arista Networks (NYSE:ANET), Salesforce (NYSE:CRM), Veeva Systems (NYSE:VEEV), Adobe (NASDAQ:ADBE) and Oracle (NYSE:ORCL).

• Exchange-traded funds (ETFs): For those who are interested in investing in a sector as a whole rather than a specific company, ETFs are generally the way to go. Top-performing cloud computing ETFs include the First Trust ISE Cloud-Computing Index Fund (NASDAQ:SKYY), the Global X Cloud Computing ETF (NASDAQ:CLOU) and the WisdomTree Cloud Computing Fund (NASDAQ:WCLD).

Cloud computing outlook

All told, the cloud computing industry is growing rapidly due to the smart economics and convenience of these internet-based platforms. In fact, research firm Gartner estimates the industry will grow by 18.4 percent in 2021 to reach $304.9 billion, up from $257.5 billion in 2020.

Sid Nag, research vice president at Gartner, attributes this impending growth in the cloud computing market in part to the COVID-19 pandemic. “The ability to use on-demand, scalable cloud models to achieve cost efficiency and business continuity is providing the impetus for organizations to rapidly accelerate their digital business transformation plans,” he said.

“The increased use of public cloud services has reinforced cloud adoption to be the ‘new normal,’ now more than ever,” added Nag in his firm’s report.

For investors looking to get in on the ground floor of a rapidly expanding industry that is integral to day-to-day life, cloud computing may be a place to consider.

This is an updated version of an article first published on the Investing News Network in 2015.

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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.