A basic principle of investing in a company is whether they’re operating in a healthy growth market. Many people have heard of the cloud, and may also be aware that it tends to be bracketed with other expanding ‘tech’ industries such as the Internet of Things, AI (Artificial Intelligence) and Big Data; but just what is the cloud and why might it be a good investment?
What is cloud computing?
It’s basically a way in which data and software applications can be accessed remotely rather than being purely held on a computer hard drive or local server. It means a company or organisation can use third party resources to hold their data and software so they don’t have to invest in their own physical storage infrastructure.
The benefits of the cloud
With the increase in data use and storage such as ‘Big Data’, organisations are finding their data handling requirements mushrooming – a trend likely to continue. The cost and space logistics of installing physical equipment would make keeping up with increased data and software storage impractical and prohibitively expensive for many.
These organisations effectively hire space on servers run by third party companies to store and remotely run their data and possibly software. Vendors such as Adobe deliver their software straight from servers in the cloud as opposed to physical media such as discs.
While there are some smaller, specialist companies operating in the cloud sector, the big corporations dominating the tech industry are very well represented in cloud computing and continue to invest heavily. Heavyweights such as Google, IBM, Microsoft, Amazon and Oracle are among the major players if you’d like your cloud investing underpinned by famous names.
It’s certainly profitable for many and growth is continuing in the sector; IBM reported a 43% rise in its cloud-derived revenue during 2015. Likewise, Oracle’s cloud sales increased by a remarkable 57% in the last quarter of 2015.
Future cloud developments
While the cloud currently consists of automating computing tasks, some pundits – including Eric Schmidt, the Executive Chairman of Google’s parent Alphabet Inc. – predict the cloud will branch into other areas of tech such as AI.
If this happens, the further prediction is that a raft of cloud specialists – many not even formed as yet – will appear and could offer attractive investment opportunities. The dilemma for investors would be in deciding who to invest in, and the possibility that a popular investment option one day could soon be replaced by another even better bet very soon after.
Of course, for some investors this can make life a bit more interesting as opposed to relying purely on the ‘safe hands’ names. This is where market intelligence and an awareness of how to pick a stock is essential.
One way to tackle this type of ‘off the beaten track’ investing in the cloud could be to try spread betting through a financial trading expert. What is spread betting? In a nutshell, it’s a way of betting on the movement of a market or specific stock without actually owning the asset.
So far as one can be prescriptive with industry sectors, it seems that the cloud is motoring along healthily with more growth and diversification to come. As it’s part of the high growth tech arena and likely to become more interlinked with other sectors, its appeal as an investment would appear high – but if you decide to invest in the newer, less proven players, then research and market awareness is key.