Cloud Technology Monthly Report | December

22 December 2020

 

  • Cloud spending by governments and healthcare providers are amongst the fastest growing.
  • Corporate IT departs continue the huge shift away from hardware and onsite service
  • COVID-19 vaccines are unlikely to stop the tidal wave of Cloud spending.
  • Increased corporate M&A activity can be seen across Cloud
  • Hybrid/Multi - Cloud bridges are being built between Cloud leaders

 

Performance Review

HAN-GINS Cloud Technology ETF (SKYY), our cloud computing ETF offers broad exposure to all key areas of the Cloud revolution – infrastructure, security, platform and software.  It includes large-cap multinationals as well as mid-and small-caps in its 50 holdings. SKYY’s large-cap and infrastructure exposure ensures it accurately tracks global cloud activity, not just the US market.

WFH behaviours and the pandemic continue to boost demand for Cloud computing services globally – driving up cloud adoption rates. Our cloud computing ETF gained an impressive 9.50% in November and is now up 23.98% for 2020.  Over 12 months, SKYY is up 28.01%.[1]

Record 3rd quarter Cloud earnings from Amazon, IBM, Google, Zoom, Crowdstrike and Microsoft is evidence that Cloud continues to be one of the big winners during the pandemic as enterprises switch to remote working using flexible cloud subscription services.

 

Cloud Technology ETF (SKYY) Performance


November


YTD
*


12 Month
**


9.50%


23.98%


28.01%

Past performance is no guarantee of future performance.

Source: Bloomberg/HANetf *YTD figures based on 01.01.20 - 30.11.20 **12 Month figures based on 01.12.19 - 30.11.20

 

For the year to date 2020, top performers in our portfolio include:

  • NVIDIA, Kingsoft, Amazon, CEVA, Apple, Alibaba, Qualcomm, Salesforce, Alarm.com and Adobe (35.6%).[2]

 

During November, the following holdings contributed most to SKYY’s return:

  • Palo Alto Networks (up 32.9%), Twilio (14.7%), Cisco (19.8%), CrowdStrike (23.8%), HP (27.8%), and Cloudflare (44.5%). CrowdStrike is a cybersecurity company providing cloud-native endpoint security platforms. It's also engaged in cloud security assessment and helps enhance the security of cloud infrastructures.
  • Zoom remains the largest holding at 6.32%, followed by Twilio (5.07%), NVIDIA (4.84%), Apple (4.47%) and Salesforce (4.47%).  Holdings are concentrated in the US with a 91.95% weighting, followed by Asia (4.96%) and Europe (3.08%).[3]

 

During November, these following developments pointed to further positive growth for SKYY:

  • Gartner[4] and Forrester[5] Research both revised their cloud spending projections up for 2021-2024.
  • Fast track adoption rates of Cloud due to WFH behaviours has led to both cloud security and cloud communications companies to enjoying significant growth. 
  • 3rd quarter revenues posted by the largest Cloud players beat most expectations.[6]
  • IT departments continue to boost their cloud spending and it is expected to shortly exceed their spending on onsite hardware and services.[7] 
  • Salesforce is buying Slack for $27.7bn, the biggest bet this year by a tech company looking to capitalize on the shift to remote work.[8]
  • We expect more M&A corporate activity in the Cloud space, particularly in the Cloud Security (cybersecurity) area.  We do not expect the anti-trust concerns to impact leading Cloud players, other than limiting huge ground breaking deals.
  • Predictions show the global cloud computing market size is expected to grow from $371.4bn in 2020 to $832.1bn by 2025, with a Compound Annual Growth Rate (CAGR) of 17.5% during the forecast period.[9]
  • The proportion of IT spending shifting to cloud is accelerating during and in the expected aftermath of the COVID-19 crisis; cloud spending is now projected to make up 14.2% of the total global enterprise IT spending market in 2024, up from 9.1% in 2020.[10]
  • Expected to grow at 16% to $117.8 billion, software as a service (SaaS) will still be the largest market segment for end-user cloud IT spending, while application infrastructure services (PaaS) are expected to grow at 26.6% to about $55.5bn.[11]
  • The growth in PaaS will be driven by remote workers continuing to access high-performing and scalable infrastructure.  While cloud infrastructure services (IaaS) spending is projected to increase 26.9% to $65.3bn as IT departments aggressively move away from onsite hardware expenditures.[12]

 

Worldwide Public Cloud Services End-User Spending Forecast (Millions of U.S. Dollars)

 

2019

2020

2021

2022

Cloud Business Process Services (BPaaS)

45,212

44,741

47,521

50,336

Cloud Application Infrastructure Services (PaaS)

37,512

43,823

55,486

68,964

Cloud Application Services (SaaS)

102,064

101,480

117,773

138,261

Cloud Application Services (SaaS)

12,836

14,880

17,001

19,934

Cloud System Infrastructure Services (IaaS)

44,457

51,421

65,264

82,225

Desktop as a Service (DaaS)

616

1,204

1,945

2,542

Total Market

242,696

257,549

304,990

362,263

 

For illustrative purposes only. Source: Gartner (Nov 2020)

 

HAN-GINS Cloud Technology UCITS ETF – Performance

Total Return NAV to Date (up to 30/11/2020)

 

1M

3M

6M

YTD

12M

Since Inception

HAN-GINS Cloud Technology UCITS ETF (Acc)

9.50%

1.10%

19.08%

23.98%

28.01%

47.33%

Solactive Cloud Technology Index (NTR)

9.54%

1.22%

19.37%

24.61%

28.73%

48.95%

 

Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”) before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in this product. Source: Bloomberg Data as of 30.11.2020

 

Industry News

It is clear COVID has propelled demand for Cloud Computing services beyond all prior predictions. Contract tracing, Telemedicine, Home Delivery & remote working are all being revolutionized by cloud services.  This is set to accelerate. 

  • Alibaba in China is likely to overtake Google as the 3rd largest, behind AWS and Azure.[13]    
  • Healthcare Cloud spending is exploding – as hospitals and governments upgrade for telemedicine and other remote medical services.[14]
  • Smaller tech firms will likely big beneficiaries due to anti-trust/regulatory focus on Big Tech. This benefits broader Tech ETFs like ITEK which has a lot of smaller holdings and is not dominated by Megacaps.
  • We don’t expect any big anti-trust (monopolies) breakup under the new administration.
  • Rivals Microsoft and Oracle last year announced they were linking their clouds to allow joint customers to migrate and run their enterprise application workloads across Microsoft Azure and Oracle Cloud. The move was seen as a bid by Redmond, Wash.-based Microsoft -- the No. 2 cloud provider -- and Redwood City, Calif., cloud underdog Oracle to better compete against AWS.

 

We predict the biggest Cloud Computing trends in 2021 as follows:

  • 94% of the worldwide workloads will be controlled by the leading cloud data centres of the world[15]
  • Hybrid/Multi-cloud approaches will lead to a breakdown of barriers between cloud providers
  • AI will improve the efficiency and speed of cloud computing.
  • Autonomous vehicles, machine learning, smart city infrastructure, and COVID Apps/response will use algorithms that can be cheaply delivered via the Cloud.
  • Gaming will be increasingly accessible via the Cloud, similar to music and movies being streamed.
  • About a third to half of most companies’ IT budget will go to cloud services.
  • With a huge spike in Healthcare Cloud services, an annual growth rate of 23% predicted.  

 

Cloud Spending Trends:

The demand for cloud services will continue to grow. The trend will not be temporary as the world will not go back to previous behaviours. Workers will become increasingly flexible regarding where they work, with cloud providing the most efficient and cost-effective solution based on time spend on the service.

The latest Q3 sales figures from the industry’s leaders show the rapid adoption rates of the cloud computing revolution. Cloud infrastructure services in Q3 2020 grew 33% to US$36.5bn. This was US$2bn higher than the Q2 2020 $9.0bn more than Q3 2019.[16] Stricter lockdown measures across Europe will likely boost these number further in Q4.

 

Constituent News

Below we highlight some of the best performing Cloud ETF holdings in SKYY’s portfolio.  Included are the stock’s individual price gains, as well as its contribution to SKYY’s portfolio return. Recent additions such as Zoom Video and Twilio have been amongst our top performers for the year.  This broader Cloud definition, includes all cloud communications, ensuring our cloud computing ETF is one of the most diversified cloud offering - across all 4 key cloud areas of Infrastructure, Platform and Software as a Service, plus Security.

 

Top 10 Constituents

Weight

Zoom Video Communications Inc

6.32%

Twilio Inc

5.07%

NVIDIA Corp

4.84%

Apple Inc

4.47%

salesforce.com Inc

4.47%

Alphabet Inc

4.17%

Alibaba Group Holding Ltd

4.06%

Amazon.com Inc

3.94%

Adobe Inc

3.75%

Microsoft Corp

3.66%

 

Regional Breakdown

Weight

North America

91.95%

Europe

3.08%

Asia

4.96%

Source: FactSet/Solactive and Bloomberg Data as of 30/11/20

 

Top Performing SKYY Contributors – November 2020

Below are the leading contributors to SKYY’s November performance – ranked by percentage contribution to SKYY’s gains. 

Name of Holding

Average Weight (%)

Total Return (%)

Contribution to Return (%)

Palo alto networks

3.57

32.88

0.95

Twilio

5.10

14.74

0.71

Cisco systems

3.27

19.83

0.59

Crowdstrike holdings

2.80

23.77

0.59

Hewlett packard enterprise

1.84

27.78

0.44

Apple inc.

4.47

9.55

0.43

Sap se

3.08

14.47

0.43

Ibm corp.

3.56

12.18

0.43

Ringcentral inc.

2.89

14.98

0.41

Alphabet

4.17

8.56

0.36

Cloudlfare inc.

1.05

44.47

0.35

Nvidia corp.

4.84

6.92

0.34

Dell technologies

2.23

14.55

0.31

 

Past performance is no guarantee of future performance Source: Morningstar Direct Data as of 30/11/2020

 

Product Details

HAN-GINS Cloud Technology UCITS ETF, is a UCITS compliant domiciled in Ireland.  

SKYY tracks the Solactive Cloud Technology Index and seeks to provide exposure to companies active in the field of cloud computing, such as service providers or producers of equipment or software focused on cloud computing.  

Please remember that the value of your investment may go down as well as up and past performance is no indication of future performance.

EXCHANGE BB CODE RIC ISIN CURRENCY INCOME
London Stock Exchange SKYY LN SKYY.L IE00BDDRF924 USD Acc
London Stock Exchange SKYP LN SKYP.L IE00BDDRF924 GBP Acc
Borsa Italiana SKYY IM SKYY.MI IE00BDDRF924 EUR Acc
XETRA 5XYE GY 5XYE.DE IE00BDDRF924 EUR Acc
SIX SKYYSW SKYY.S IE00BDDRF924 CHF Acc

 

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