Cloud computing stocks are scorching hot and several of ETFs are dedicated to that group. One of the newest funds in that fray – the WisdomTree Cloud Computing ETF (WCLD) – is already establishing a leadership role at less than a year old.
The WisdomTree Cloud Computing 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 cloud computing arms race isn’t relegated to the tech giants like Google and Amazon. Organizations around the world are opening up their wallets and spending more on cloud computing technology to fortify their core businesses, resulting in record spending in 2019 and those spending records could be shattered this year, a theme WCLD and its index are heavily levered to.
Importantly, WCLD is exposed to changes – many forced by the coronavirus – in how people work. That theme has significant, long-ranging implications.
“Then, when you think about what’s happening today with the COVID-19 pandemic, you realize the future of work is going to change,” said Ben Jones, Product Development Specialist with the Index Research team at Nasdaq. “The future of your everyday life has changed. And cloud computing is making it easier for people to work from home, access data, download videos, etc.”
Cloud spending is expected to increase as more companies integrate cloud computing into their existing infrastructures. According to market analysts as Canalys, this type of spending will sustain itself over the next five years with estimates that total spending on cloud infrastructure services could hit $284 billion in 2024.
What’s compelling about WCLD is that it’s index directly taps into cloud growth with some vital revenue requirements.
“So for new companies to join the index, the methodology looks for revenue growth for 15% or more over the past two years. And then we have to see 7% growth in revenue [in at least one of the last two fiscal years] for existing companies in the index,” said Jones in an interview with reporter Jill Malandrino.
Cloud computing represents a significant source of disruption not only in the technology sector but in the investment world as well. It has become ingrained in nearly every aspect of our lives by fundamentally altering how we consume, process, and share information in the digital age. The trend toward cloud-based solutions offers a compelling, long-term opportunity for investors to gain exposure to a quickly developing segment of the technology sector.