Technology ETFs provide diverse investment opportunities, particularly for those interested in technology market. The ETFs in this segment focus on innovative technologies like cloud computing and AI. Therefore, investing in these technologies through ETFs can offer diversification benefits and potentially higher yields.
Given the backdrop, let’s look at the best-performing cloud computing ETFs Global X Cloud Computing ETF Global X Cloud Computing ETF (CLOU), iShares Future Cloud 5G and Tech ETF (IDAT), and First Trust Cloud Computing ETF (SKYY) for tech exposure.
The rapid evolution of technology has transformed various operations and this wave is expected to continue in the coming years. Gartner predicts that the worldwide end-user spending on public cloud services will grow 20.4% to reach $675.40 billion in the present year, up from $561 billion in 2023. This growth is primarily fueled by generative AI and application modernization.
In 2024, Software as a Service (SaaS) is anticipated to be the largest category of cloud computing, capturing over 40% of the overall public cloud spending followed by Platform as a Service (PaaS) and Infrastructure as a Service (IaaS) each delivering around 20% of all public cloud spending.
Cloud computing, a framework that offers computing resources over the internet alternative to local hardware and infrastructure is being navigated by various factors and trends including introduction of the citizen developer, better AI/ML, automation, increasing investment in data, and rising competition resulting in robust growth of the cloud computing market.
The cloud computing market is expected to exhibit growth at a notable CAGR of 14.4%, resulting in a market volume of $1.37 trillion by 2031 driven by adoption of AI, ML, big data, 5g technologies, and edge computing contributing to the market demand.
Given these encouraging trends, let’s look at the fundamentals of the top three Technology Equities ETFs, beginning with number 3.
ETF #3: Global X Cloud Computing ETF Global X Cloud Computing ETF (CLOU)
CLOU seeks to invest in companies set to benefit from the increased adoption of cloud computing technology, like companies whose principal business is in offering computing SaaS, Platform-as-a-Service (PaaS), Infrastructure-as-a-Service (IaaS), and so on. The fund tracks the Indxx Global Cloud Computing Index.
The fund has assets under management (AUM) of $360.80 million. CLOU’s top holdings include Wix.com Ltd. (WIX) with a 5.95% weighting, followed by SPS Commerce, Inc. (SPSC) at 4.74%, and Digital Realty Trust, Inc. (DLR) and Box, Inc. Class A (BOX) at 4.64% and 4.52%, respectively.
The ETF has a total of 36 holdings, with its top 10 assets comprising 44.75% of its AUM. CLOU’s expense ratio is 0.68% compared to the category average of 0.58%.
CLOU has gained 1.8% over the past nine months to close the last trading session at $18.91. It has a beta of 0.98. The fund’s NAV was $18.94 as of August 9, 2024.
CLOU’s POWR Ratings reflect its solid prospects. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Within the Technology Equities ETFs group, it is ranked #69 of the 119 ETFs.
To access all CLOU’s POWR Ratings, click here.
ETF #2: iShares Future Cloud 5G and Tech ETF (IDAT)
IDAT invests in global digital infrastructure technology providers specifically identified by Morningstars research team as companies that benefit from having significant exposure to two primary themes: cloud computing and 5G. IDAT tracks an index of global technology companies focused on cloud computing and 5G.
IDAT tracks the Morningstar Global Digital Infrastructure & Connectivity Index. With $6.9 million in AUM, the fund’s top holdings are NVIDIA Corporation (NVDA) with a 5.26% weighting, Pure Storage, Inc. Class A (PSTG) at 4.06%, and Broadcom Inc. (AVGO) and Arista Networks, Inc. (ANET) at 3.76% and 3.59%, respectively. The ETF has a total of 48 holdings, with its top 10 assets comprising 34.15% of its AUM.
The fund has an expense ratio of 0.47%, lower than the category average of 0.58%.
IDAT pays an annual dividend of $0.25, which translates to a 0.86% yield at the prevailing price level.
IDAT has surged 18.4% over the past year to close the last trading session at $28.70. It has a beta of 1.17. The fund’s NAV was $28.76 as of August 9, 2024.
IDAT’s sound fundamentals are reflected in its POWR Ratings. The fund has an overall rating of B, which translates to a Buy in our proprietary rating system.
The fund has a B grade for Buy & Hold. Of the 119 ETFs in the Technology Equities ETFs group, IDAT is ranked #49.
Click here to see all the IDAT ratings.
ETF #1: First Trust Cloud Computing ETF (SKYY)
Launched and managed by First Trust Advisors L.P., SKYY invests in global public equity markets. The fund also invests in the growth and value stocks of companies across diversified market capitalizations. SKYY seeks to track the performance of the ISE CTA Cloud Computing Index by using a full replication technique.
The fund has an AUM of $2.76 billion. Its top holdings include International Business Machines Corporation (IBM) with a 4.48% weighting, followed by Arista Networks, Inc. at a 4.41% weighting, and Oracle Corporation (ORCL) and Microsoft Corporation (MSFT) at 4.40% and 3.82%, respectively. SKYY has a total of 63 holdings, with the top 10 assets comprising 38.33% of its AUM.
The fund has an expense ratio of 0.60% compared to the category average of 0.58%.
SKYY has gained 20.4% over the past year to close the last trading session at $92.13. It has a beta of 1.06. The fund has a NAV of $20.16 as of August 9, 2024.
SKYY’s POWR Ratings reflect this strong outlook. The ETF has an overall rating of B, which translates to a Buy in our proprietary rating system.
SKYY has an A grade for Buy & Hold. It also has a B grade for Peer and Trade. The fund is ranked #24 in the list of 119 ETFs in the same group.
To access all the POWR Ratings for SKYY, click here.
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SKYY shares were trading at $90.99 per share on Monday afternoon, down $0.83 (-0.90%). Year-to-date, SKYY has gained 3.79%, versus a 12.75% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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