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A Deep Dive into Cloud Computing Stocks

Plus500 | Monday 31 July 2023

Cloud computing has been an integral part of technology as we know it and, as a result, more and more companies that advance cloud computing are emerging and making a buzz in the stock market. 

But what exactly is cloud computing, how is it related to trading and investing, and what else do you need to know about it?  Here’s all you need to know about cloud computing and its effect on the markets:

An illustration of cloud computing

Understanding Cloud Computing

First of all, to understand what cloud computing is, it is important to know what a cloud actually means. When talking about technology, a cloud is a set or a network of servers that work together to run programs, provide content, and store data in order for it to be accessible online from internet-enabled devices.

Cloud computing, is, therefore, the model that delivers the data, applications, and services available in several servers (clouds) over the internet. In other words, it is the process of data storage and access over the internet. 

Types of Cloud Computing

It may also be helpful to note that there are different types of cloud computing to distinguish between the three main ones: Public Cloud, Private Cloud, and Hybrid Cloud. 

Public Cloud 

Public Cloud service providers, such as Google Cloud, offer internet-based access to resources such as computing power, storage, networking capabilities, development environments, and applications. These resources are owned and operated by third-party entities.

Private Cloud

A private cloud is constructed and operated exclusively by one organization, usually within its own physical premises. This type of cloud computing enhances data control, flexibility, and protection.

Hybrid Cloud 

Hybrid clouds refer to environments that combine a private computing environment (such as traditional IT infrastructure or private cloud, including Microsoft Edge) with one or more public clouds which enables the utilization of resources and services from various computing environments.

The Three Models of Cloud Services

In addition to the different types of cloud computing, it may also be worth noting that there are three main cloud service models and these are IaaS, PaaS, and SaaS.

Infrastructure as a Service (IaaS)

IaaS provides virtualized computing (the distribution of a computer’s hardware resources among multiple digitally isolated environments) resources on the internet and allows users to rent and manage infrastructure without the need for physical hardware.

Platform as a Service (PaaS)

PaaS provides a cloud-based platform equipped with development tools, databases, and operating systems which enables developers to create and oversee applications without having to worry about intricate infrastructure concerns.

Software as a Service (SaaS)

SaaS refers to the hosting of software services over the internet and the provision of them on a subscription basis. This, in turn, eliminates the need for local installation and maintenance.

Major Cloud Computing Companies 

Whereas the market does not fall short of companies that are involved in the advancement of cloud computing, some of the main ones include the following:

Amazon (AMZN)

Amazon is an American multinational technology company that is actually considered the biggest cloud computing provider in the world through its Amazon Web Services (AWS) subsidiary.

Alphabet (GOOG)

Google's parent company, Alphabet, is an American big tech company based in California and is considered the third largest cloud computing provider through its Google Cloud Platform (GCP).

Microsoft (MSFT)

Microsoft is an American multinational tech behemoth and its Microsoft Azure cloud services are deemed some of Amazon’s AWS’ biggest competitors. 

IBM (IBM)

Short for International Business Machines Corporation, IBM is an American tech company that has also advanced cloud computing through its IBM Cloud services.

Alibaba (BABA)

Alibaba is a Chinese multinational tech and e-commerce company that has developed Alibaba Cloud, which is considered the 4th biggest cloud computing provider worldwide.

Oracle (ORCL)

Oracle is an American multinational computer technology company that is famous for its databases and has developed Oracle Cloud which is among the leading cloud computing services in the world. 

Other companies that advance cloud computing through their services include GPUgiant NVIDIA (NVDA), and cloud companies Salesforce (CRM) and Snowflake (SNOW).

The Economics of Cloud Computing

Another important step to understanding how cloud computing functions is to understand the economics and finances behind it. This mainly means the costs and benefits of this technology:

The Economic Benefits of Cloud Computing

Cloud economics centers on economies of scale (how an enterprise gains cost advantages through scalability) and global reach. Cloud providers are able to save organizations money because economies of scale allow them to procure computing resources at lower costs by purchasing computing resources in bulk. This shared resource approach spares companies from significant upfront capital expenses related to expensive infrastructure and offers flexibility in resource scaling.

As for global reach, cloud computing brings substantial savings by eliminating the need to house servers on-premises and enables servers to be accessed from anywhere. This, as a result, can reduce labor costs notably. 

Furthermore, cloud computing offers business agility. This is because when companies use cloud resources, they gain the ability to deploy applications rapidly, adjust storage and computing capacity as needed, and respond promptly to shifts in the market and customer requirements. As a result, this enhanced agility leads to accelerated revenue growth.

As for cloud computing costs, it is important to note that while several factors can affect the costs of cloud computing, the main ones are networking, storage, and computing costs.

Accordingly, given its economic advantages and the fact that it can aid economic growth, the traction surrounding Cloud Computing may make more sense now. 

Cloud Computing and Artificial Intelligence (AI)

Just like cloud computing, Artificial Intelligence (AI) has also been making an ostensible buzz both in the news and the stock market lately.

Luckily for tech fanatics, these two technologies are often intertwined and can even have a symbiotic relationship. In addition, both technologies aim toward the similar goal of advancing businesses beyond IT. 

In fact, AI and cloud computing can come together to automate data analysis, management, security, and decision-making processes. Already, there are some common AI and cloud computing applications which include the following examples:

  • IoT: IoT is short for Internet of Things and it essentially means a network of physical devices provided with sensors and software. Cloud-based architectures and services supporting IoT can store and process data generated by AI platforms on IoT devices.

  • Chatbots: Chatbots are software that mimics human conversation. These use AI-based applications to employ natural language processing for user conversations. Moreover,  cloud platforms store and process data collected by chatbots, connecting them to relevant AI applications for further processing. One prominent example of this is OpenAI’s ChatGPT which has made a buzz over the past couple of months. 

  • Business Intelligence: Business Intelligence (BI) is the set of strategies and technologies used to store and manage a business’s data. AI cloud computing plays a vital role in Business Intelligence (BI) applications, gathering data on markets, target audiences, and competitors, while the cloud facilitates data storage, transfer, and AI-powered predictive analytics.

Other types of AI-based Cloud Applications types are Cognitive Cloud Computing which are self-learning systems that also mimic human behavior and AI as a Service (AIaaS) which means a third-party cloud-based service that outsources AI.

Investing in Cloud Computing Stocks

For traders and investors seeking to gain exposure to cloud stocks, one way to do it is through direct investment in the shares of cloud-computing companies. However, for traders who are interested in gaining exposure to Cloud Computing stocks for less capital and without having to own each stock, Plus500’s share CFDs may be an option.

This is because share CFDs allow traders to trade on both rising and falling prices without having to own the underlying asset. In addition, whereas investing may be suitable for longer-term results, traders with a short-term investment horizon and high-risk tolerance may find CFDs more appropriate for their investment objectives and needs. 

Regardless, of whichever option you choose, it is important to understand the risks involved in cloud computing stocks trading and how the cloud industry actually works. In addition, you may also want to consider your trading strategies to see which one fits your goals and the method you want best.

Future Outlook for Cloud Computing Stocks

While the future may not be certain, some expect Cloud Computing stocks to actually grow by about 14% between 2023 and 2030. If this materializes, then it would be above the overall economy’s growth. (Source:Nasdaq

However, as more and more technologies emerge and more companies are put in the spotlight, whether or not these predictions will hold true is yet to be determined. One thing to keep in mind is that the markets are certainly volatile and the economy can be unpredictable but overall as of now, the future for cloud computing may seem bright. 

Conclusion

To sum it up, cloud computing has undeniably become an essential pillar of modern technology, creating a plethora of companies that are transforming the stock market landscape. 

Accordingly, understanding cloud computing is crucial for investors, as it plays a pivotal role in shaping the future of trading and investing, but only time will tell where this nascent technology will head to.


This information is written by Plus500 Ltd. The information is provided for general purposes only, and does not take into account any personal circumstances or objectives. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. No representation or warranty is given as to the accuracy or completeness of this information. It does not constitute financial, investment or other advice on which you can rely. Any references to past performance, historical returns, future projections, and statistical forecasts are no guarantee of future returns or future performance. Plus500 will not be held responsible for any use that may be made of this information and for any consequences that may result from such use. Hence, any person acting based on this information does so at their own discretion. The information has not been prepared in accordance with legal requirements designed to promote the independence of investment research.

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