Looking to Invest in the Cloud? Here Are Some Things to Consider

Learn about cloud computing and its impact on technology and other sectors.

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Key Takeaways

  • Cloud computing has not only added convenience of global access to stored data, but also has helped enhance processing power and cost reduction
  • There are several things to keep in mind while considering cloud company stocks

In just over a decade, an emerging set of technologies has given rise to a new capacity: one that allows people to store and access their digital data from virtually any location in the world via internet connection. It’s called cloud computing. More popularly referred to as “the cloud,” this relatively new technology can make digital data access more decentralized and mobile; more streamlined and accelerated; more ubiquitous, and possibly more dynamic.

No longer restricted to a physical device or geographical location, data can now be made to “float” across a massive network of computers. Hovering from above in this digital infrastructure, data can virtually “follow” its user, and provide the user with a greater degree of operational mobility and a speed of access that might not be possible through traditional data storage means.

For individuals and businesses, this means that digital files—documents, reports, photos, audio/visual recordings, and more—can be made accessible, storable, and transferable 24/7 from almost any location. A few of the more cutting-edge developments in this space are about to be discussed in the upcoming Google Cloud Next ‘18 exhibition, according to the conference website.

Google Cloud Next ‘18

Google Cloud Next 2018 is a three-day exhibition to be held at San Francisco’s Moscone Center starting on July 24, 2018. The exhibition aims to present a series of key talks and workshops on the latest developments in Google’s cloud technology applications, according to the conference website. While the impact of cloud technology may be increasing steadily across several industries including healthcare, automotive, transportation, media, lodging, consumer retail, banking/finance and more, Next 18’s sessions are focused less on industry-specific applications and more toward operation-specific functions; an expansive range of functions, from basic email add-ons to cutting-edge Big Data and Internet of Things (IoT) integration.

Though many of the session topics have a heavy tech-development focus, Next ‘18 is open to virtually anyone who is interested in this technology, including CEOs, NGOs, developers, or tech enthusiasts. Investors who are interested in this space might also glean some insight as to where this technology might be headed, which industries might be impacted the most, and even potential investment opportunities.

What is Cloud Technology?

For those who may not be familiar with cloud computing, think of it in this way: instead of storing your digital files on a computer hard drive under your desk, or on a server at a fixed location, cloud technology may allow you to store your data across a massive global infrastructure of computers.

This provides more processing power. And with this comes the ability to store far more information than what’s possible with just a single computer or server. It also means that no matter where you go, as long as you have an internet connection, you may be able to upload or download your files from virtually any place and at any time of your choosing.

On an individual level, this may provide a real convenience for those who need to access files on the go. But at the scale of a large and complex business operation, enhanced data accessibility, storage capacity, processing power, and infrastructure virtualization can also translate into potential cost reductions.

How Might Cloud Computing Impact the Technology Sector?

“Cloud computing” is a catch-all term for three core services:

  • Software as a Service (SaaS),
  • Platform as a Service (PaaS), and
  • Infrastructure as a Service (Iaas).

These services are offered on a subscription basis. Cloud services can be as simple as a basic app download or as complex as a large-scale virtualized architecture of networks, servers, and storage.

With its capacity to drive the accessibility of digital resources to businesses and mass consumers, cloud computing can be adopted by almost any business in any industry.

Growth Potential

With its capacity to potentially reduce costs while increasing both processing power and digital storage capacity, cloud technology could become something of a competitive driver.

According to a report released by research firm Wikibon, cloud spending in 2012 generated $26 billion. In 2015, the year the report was released, spending rose to $80 billion. Wikibon forecasts public spending on cloud services to reach approximately $522 billion by 2026.

Investing in Cloud Company Stocks

If you’re looking to invest in cloud company or cloud storage stocks, it might be prudent to consider a couple caveats:

  • First, the cloud hasn’t been around for very long. As an emerging technology, it is still evolving and hence subject to change over time. Some of the companies contributing to this field may eventually reap the rewards for their efforts, but such gains, may take years to develop as the technology slowly matures.
  • Second, with regard to cloud company stocks, none of the major players in this space are solely focused on the cloud. None of them constitute pure plays and this segment of those businesses might be affected by other segments of their business (e.g. Google and advertising revenue; Amazon and retail sales; etc.). The Company Profile tool, available in the thinkorswim® platform from TD Ameritrade, can show you the revenue breakdown of each business unit, plus a rundown of the competitive landscape, for each company you may be considering.

Who Are the Major Players in the Cloud Space?

With more companies jumping into the cloud development space, here are a few of the more well-known names in the industry:

  • Alphabet (GOOG). In addition to developing the Google search engine, Alphabet was also one of the earliest adopters of virtual operating systems, distributed computing, and large-scale open-source software development; Alphabet currently hosts nine cloud centers in the U.S. and six across the globe.
  • Amazon (AMZN). Amazon utilizes the cloud to run its massive e-commerce infrastructure, and re-selling those capabilities to other companies. According to Synergy Research Group, Amazon Web Services (AWS) dominated the largest share—40%—of the cloud computing market toward the end of 2017.
  • Apple (AAPL). Apple currently hosts four large data centers in the U.S. and has indicated that it is committed to expanding its cloud capacity around the world. With its services revenue reaching $30 billion in fiscal 2017, according to Kiplinger, Apple’s iCloud profits has exceeded those of its other services such as iTunes and App Store.
  • Microsoft (MSFT).  A tech giant that had built its fortune on traditional software sales—ever since the days of floppy disks and MS-DOS—Microsoft has said it has begun shifting over to a Software as a Service (SaaS) subscription model. In its earnings announcement, the company reported its Azure cloud computing business has continued to have growth of nearly 90%.
  • Netflix (NFLX). Having started as a mail-based DVD subscription service, Netflix is an example of cloud-based expansion. Its streaming services and analytics, both of which utilize the cloud, could be one of the key factors contributing to the company’s expansive growth beyond its original mail-based business model.
  • Salesforce (CRM). A cloud-computing company, Salesforce has reported that its revenues have come primarily from its subscription-based SaaS customer relations management (CRM) services.

When it comes to researching cloud company stocks, there are a number of factors to consider when deciding whether such an investment opportunity might be right for your portfolio and investment objectives. The TD Ameritrade stock screener can help provide you with an informative technical and fundamental overview of each stock, information that may be helpful when making a decision based on your preferred criteria.

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