By Adriano Mesina
What is cloud investing? The “cloud” we are referring to is computing or data centers that handle the data that is shared on the internet and the devices that distribute it. You can invest in firms that operate the cloud, provide services on the cloud, or even participate in the ownership of the cloud.
While the cloud rose to become among the best investments of the last decade, the pandemic caused by coronavirus has no doubt fast-tracked the shift to cloud computing. No longer is the topic of the cloud confined to forum discussion and chat groups among techies, as it has now grown into a large industry earning billions of dollars every year globally.
Cloud stocks will possibly progress as a leading driver of investment returns in the next decade. They will play a major role in the digital revolution of many businesses as they modernize processes for the 21st century.
What is cloud computing?
Not so long ago, everyone kept their files on a hard drive or local storage device. This made everyone highly dependent on such devices that can be heavy and cumbersome to users. If you lost or damaged your hard drive or storage devices, or a virus attacks them, you risked losing all of your important information.
Losing important information has become one of the greatest worries of individuals and businesses alike. Now, cloud computing has changed all of that. Cloud computing refers to storing and retrieving information over the internet. Now, you no longer have to use any storage devices because you can use a remote server.
It is called the cloud because the data is being stored in a virtual space. Just imagine a real cloud hovering over us, and that it carries tons of important data. Yet we do not see this cloud, it is invisible. That is in essence how cloud computing works.
With the cloud, our devices such as laptops and smartphones no longer need to carry around data which makes it vulnerable to getting lost. But when you connect to the internet, you can retrieve all your stored data wherever you are in the world and whatever device you use.
Components of the cloud
Similar to the earth’s atmosphere, there are also a few layers to the cloud.
- Software-as-a-service (SaaS)
SaaS is a software licensing and delivery model that creates and provides on-demand applications for individual and business use. This is the most popular part of the cloud among consumers. Among the many famous apps that use SaaS include Netflix, Spotify, and Salesforce.
- Platform-as-a-service (PaaS)
PaaS allows software developers to create, manage, and distribute apps. Salesforce is among the many apps that provide PaaS in addition to SaaS. They provide developers with ways to customize apps with the help of a set of online tools.
- Infrastructure-as-a-service (IaaS)
This is a lesser-known component of the cloud, but it is the base for every cloud offering. It is the foundation needed for all businesses that want to operate in the cloud. A service provider for IaaS gives the server space for storing data, computing, networking, and securing the network. Microsoft, Google, IBM, and Amazon are among the most notable companies that are in the IaaS space.
Why invest in the cloud?
The cloud has become the moving force behind almost all the advances in technology in the last decade. Research made by Gartner discovered that cloud spending in 2019 was at $228 billion and is expected to go up to $266 billion by the end of 2020.
Research from Centurylink and Statista paints an even bigger picture than that. They said global cloud spending, in general, may reach $400 billion by the end of 2020.
We are currently in the middle of a powerful digital revolution where many businesses are shifting to data center-based computing. This movement will most likely lead to continued high growth in cloud spending.
Cloud stocks
- Amazon
Not surprisingly, the largest market share in the cloud is currently held by Amazon. According to Investopedia, Amazon Web Services has earned a whopping $10 billion in revenue in the first quarter of 2020.
- Microsoft
Microsoft follows Amazon in market share in the cloud. The company’s cloud segment rose to $13.4 billion. Azure was the primary driver of this growth.
One thing that is working for Microsoft’s cloud offerings is that since e-commerce is growing, many other companies who are into this sector will most probably use Microsoft’s services instead of Amazon’s. Amazon, of course, happens to be their competitor in the e-commerce space.
- Alphabet
Google Cloud Platform (GCP) is known for its data analytics and machine learning capabilities. Alphabet’s strong financial health and continuous investment in cloud infrastructure make it a solid choice for investors.
- Salesforce
Salesforce is a leader in cloud-based customer relationship management (CRM) software. Its extensive suite of cloud applications and services helps businesses manage their customer interactions and data effectively.
- Adobe
Adobe’s Creative Cloud offers a range of software for creative professionals, including Photoshop, Illustrator, and Premiere Pro. The company’s shift to a subscription-based model has provided steady revenue growth.
Conclusion
Whatever your decisions when looking for high-growth cloud companies, it is essential to recognize that stocks such as these tend to be extremely unstable; prices can fluctuate rapidly. A solid technology investment strategy is to expand your portfolio regularly and maintain small individual positions. Your investment philosophy could be to diversify your portfolio monthly, quarterly, or perhaps whenever a stock dips by a certain percentage.
Most of all, keep in mind that cloud investing is about long-term success. It does not matter if the stocks you own are from large or small companies. Investing in the cloud has brought plenty of successes to its investors, and the future remains bright for the years to come.