The opportunity in cloud computing stocks

cloud Xero NEXTDC Aussie equities BetaShares

12 February 2021
| By Laura Dew |
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There is a vast opportunity in cloud computing stocks following the pandemic as BetaShares launches a dedicated cloud-computing fund, but which stocks have done well?

The firm said this would be the first exchange traded fund (ETF) to focus specifically on cloud computing in developed and emerging markets and would launch in late February. Example holdings included Xero, DropBox and Zoom.

“The benefits of cloud-based computing have never been more apparent than today, with the COVID-19 pandemic accelerating existing trends which rely on cloud-computing services such as flexible working, video conferencing, online shopping and digital media consumption,” the firm said.

“Given ongoing growth in online activity and the sizable share of the world’s digital data and software applications still maintained outside of the cloud, continued adoption of cloud-related services seems likely.”

Australian stocks focused on cloud computing included NextDC, Xero, 5G Networks and Megaport. Over one year to 10 February, 2021, the best-performing stock was NextDC which returned 65% followed by Xero which returned 56%.

NextDC was a data centre operator around Australia while Xero ran cloud accounting software.

NextDC was held by funds including OC Dynamic Equity and SGH 20 while Xero was held by Hyperion Australian Growth Companies and Australian Ethical Advocacy, among others.

Meanwhile, looking at existing technology funds and ETFs available in the Australian Core Strategies universe, the best-performing fund during 2020 was BetaShares Asia Technology Tigers which returned 61.3%.

This fund was the second-best ETF of the whole year, second only to the ETFS Battery Tech & Lithium ETF which returned 62.2%.

Largest holdings in the fund included Taiwan Semiconductor at 10.6%, joint with Chinese e-commerce Meituan. The largest sector weighting was 28% to internet and direct marketing retail followed by 18.8% in semiconductors.

This was followed by returns of 42.2% for the CFS Wholesale Global Technology and Communication fund and 37.6% for the BetaShares Global Robotics and Artificial Intelligence ETF.

All of the available funds saw returns of more than 24% compared to returns by the ASX 200 over the same period of 1.4%.

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