Cloud computing ETFs target companies leading the digital revolution by providing essential cloud services such as infrastructure, software, and platforms. As digital transformation accelerates, these ETFs offer investors opportunities for significant growth and innovation, capitalizing on the expanding cloud market.
Therefore, investors might consider investing in fundamentally strong cloud computing ETFs, such as iShares Future Cloud 5G and Tech ETF (IDAT) and First Trust Cloud Computing ETF (SKYY).
The cloud computing market is shaped by rapid digital transformation, with businesses increasingly adopting cloud tech to enhance scalability, flexibility, and cost-efficiency. This shift boosts demand for tech such as SaaS, serverless computing, and private clouds to effectively manage these evolving environments.
Furthermore, global spending on public cloud services is projected to surge by 20.4%, reaching $675.40 billion in 2024. This impressive growth is driven by advancements in generative AI and application modernization. Consequently, cloud computing ETFs offer investors a valuable opportunity to benefit from the expanding cloud industry, capturing the potential of this dynamic sector.
Given this favorable backdrop, let’s evaluate the two Technology Equities ETFs picks, starting with number two.
ETF #2: iShares Future Cloud 5G and Tech ETF (IDAT)
IDAT is an exchange-traded fund launched by BlackRock, Inc. and managed by BlackRock Fund Advisors. The fund invests in public equity markets, focusing on companies operating in information technology, and those related to cloud computing and 5G sectors. It invests in both growth and value stocks across diversified market capitalizations. The fund seeks to track the performance of the Morningstar Global Digital Infrastructure & Connectivity Index using a representative sampling technique.
With $7.10 million in assets under management (AUM), IDAT’s top holding is NVIDIA Corporation (NVDA) with a 5.18% weighting, followed by Broadcom Inc. (AVGO), with a 3.79% weighting, and Arista Networks, Inc. (ANET), with 3.39%. It has a total of 49 holdings.
It has an expense ratio of 0.47%, lower than the category average of 0.58%. It currently has a NAV of $29.19.
The fund’s annual dividend of $0.25 yields 0.85% on the current share price. Its four-year average yield is 0.62%.
IDAT has gained 13.3% over the past nine months and 5.6% year-to-date to close the last trading session at $29.12.
IDAT’s POWR Ratings reflect this promising outlook. The ETF’s overall B rating equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
IDAT has a B grade for Buy & Hold and Trade. Of the 119 ETFs in the Technology Equities ETFs group, it is ranked #47. Click here to access all of IDAT’s POWR Ratings.
ETF #1: First Trust Cloud Computing ETF (SKYY)
SKYY is an exchange-traded fund launched and managed by First Trust Advisors LP. The fund invests in public equity markets, targeting companies in information technology, software, IT and internet services, infrastructure, data management, storage, hardware, and platforms for software creation via virtualization or middleware delivered online. It invests in both growth and value stocks across diversified market capitalizations and seeks to track the performance of the ISE CTA Cloud Computing Index using a full replication technique.
With $2.87 billion in AUM, the fund has a total of 64 holdings. SKYY’s top holding is Oracle Corporation (ORCL) with a 4.57% weighting, followed by International Business Machines Corporation (IBM) with a 4.56% weighting, and Nutanix, Inc. Class A (NTNX) with 4.27%.
SKYY has an expense ratio of 0.60%, higher than the category average of 0.58%. It currently has a NAV of $94.54. Its fund outflows came in at $38.02 million over the past month.
SKYY has gained 13.5% over the past nine months and 16.9% over the past year to close the last trading session at $94.58.
SKYY’s strong outlook is reflected in its POWR Ratings. The ETF has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
It has an A grade for Buy & Hold, Peer, and Trade. It is ranked #4 in the same group. To access all the POWR Ratings for SKYY, click here.
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SKYY shares were trading at $95.91 per share on Wednesday afternoon, up $1.33 (+1.41%). Year-to-date, SKYY has gained 9.40%, versus a 16.49% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
2 Cloud Computing ETFs to Buy as Digital Transformation Accelerates StockNews.com
