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Cloud Technology Monthly Report | January

 

Key Takeaways

 Hybrid/Multi-Cloud agreements are being built between Cloud leaders.

  •  Global public cloud spending is set to dominate enterprise software spending, exceeding $750bn by 2025. (Gartner).
  •  Cloud Infrastructure spending to exceed $100bn in 2021.
  •  Majority of corporate IT budgets expected to be devoted to Cloud spending.
  •  Increased corporate M&A activity seen across Cloud (i.e., Salesforce-Slack deal).

 

Cloud Technology ETF (SKYY) Performance


December


12 Month
*


4.25%


29.25%

Past performance is no guarantee of future performance.

Source: Bloomberg/HANetf *12 Month figures based on 01.01.20 - 31.12.20

 

Performance Review

HAN-GINS  Cloud computing ETF (SKYY) offers broad exposure to all key areas of the Cloud revolution – infrastructure, security, platform and software – as a service.  SKYY 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 well beyond just the US and software developers.

COVID related WFH behaviours continues to boost demand for  cloud computing services globally – fast tracking Cloud adoption rates. Our Cloud computing ETF gained an impressive 4.25% in December and was up 29.25% for 2020. [1] Past performance is no guarantee of future performance.

We expect continued M&A activity following the recent Salesforce-Slack deal.  Forthcoming 4th quarter results are expected to mirror recent record 3rd quarter Cloud earnings from Amazon, IBM, Google, Zoom, Crowdstrike and Microsoft. Big trends include moves to more hybrid, multi-cloud infrastructure, with flexible on-demand subscription services (pay per use), plus demand for greater cloud security.

For the full year 2020, top performers in the portfolio of our Cloud computing ETF include a number of holdings exceeds 100% gains.  It is encouraging to see these gains being shared across companies of varying sizes throughout the Cloud landscape (megacaps, large caps and midcaps):[2]

 

Holdings

% Average Weight

Total Return (%)

Contribution to Return (%)

KINGSOFT CORP LTD

0.50

150.89

0.49

ALARM.COM HOLDINGS INC

0.32

140.75

0.37

NVIDIA CORP

4.90

122.30

4.65

INSEEGO CORP

0.22

111.05

0.21

CLOUDFLARE INC - CLASS A

0.35

106.78

0.63

CROWDSTRIKE HOLDINGS INC - A

1.20

99.44

2.18

APPLE INC

4.43

82.31

3.12

AMAZON.COM INC

4.46

76.26

3.31

Source: Morningstar Direct Data as of 31/12/20. Past performance is no guarantee of future performance. 

 

 

We predict the biggest Cloud Computing trends in 2021 to include:

 

  • Hybrid cloud will be the norm. In 2020, we saw more cloud migrations than ever before as the landscape of data lakes has continued to evolve. Leading to a breakdown of barriers between cloud providers
  • There will be a maturing of the cybersecurity around cloud infrastructure.
  • Cloud-native projects will accelerate. Expect to see the percentage of purpose-built, cloud-ready (refactored) applications increase in 2021 as organizations look to gain the elasticity, scalability and cost benefits of the cloud.
  • A stronger focus on global visibility and governance of data. In hybrid- and multi-cloud environments, global visibility and governance of storage will be a major focus moving forward.
  • AI will improve the efficiency and speed of cloud computing.
  • Autonomous vehicles, machine learning, smart city infrastructure, and COVID Apps/response use algorithms that can be cheaply delivered via the Cloud.

 

HAN-GINS Cloud Technology UCITS ETF – Performance

Total Return NAV to Date (up to 31/12/2020)

 

1M

3M

6M

YTD

12M

Since Inception

HAN-GINS Cloud Technology UCITS ETF (Acc)

4.25%

8.45%

19.14%

29.25%

29.25%

53.59%

Solactive Cloud Technology Index (NTR)

4.31%

8.59%

19.46%

29.97%

29.97%

55.37%

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 31/12/20

The global cloud computing market size is expected to grow from $371.4bn in 2020 to $832.1bn by 2025 - a Compound Annual Growth Rate (CAGR) of 17.5% during the forecast period.[3] Worldwide end-user spending on public cloud services is forecast to grow 18.4% in 2021 to total $304.9bn, up from $257.5bn in 2020, according to Gartner, Inc.[4]

  • 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.

 

We expect significant consolidation (acquisitions) across the Cloud Security area as more Cloud companies attempt to build economies of scale and security services into their 1-stop offerings.

  • IT departments continue to boost their cloud spending – expected to shortly exceed their spending on onsite hardware and services.
  • We do not expect the anti-trust concerns to impact leading Cloud players, other than limiting huge groundbreaking deals.
  • Cloud increasingly underpins the Digital Revolution – via the Internet of Things.  This includes driving Social Media, Digital Entertainment to Healthcare Innovation (trackers and telemedicine), Future Cars, Cyber Security and AI-Robotics.
  • In the 4th quarter, public spending on Cloud infrastructure exceeded spending on traditional IT infrastructure for the second consecutive quarter. Governments and Healthcare providers are now among the leading Cloud spenders.  

 

For illustrative purposes only. Source: https://www.statista.com/chart/18819/worldwide-market-share-of-leading-cloud-infrastructure-service-providers/

 

Industry News

While COVID has fast-tracked demand for Cloud Computing services beyond all expectations, we see continued adoption globally and new trends emerging (see above).

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.[5] The 2nd COVID lockdown measures globally will likely boost these numbers further in Q4.

The multi-cloud pioneered by the likes of IBM’s Red Hat subsidiary, along with disaster recovery services (DraaS) and cybersecurity additions ensures Cloud growth remains in its early stages.

DRaaS adoption is being driven by the need for global business resilience, helping to replicate and hosting virtual servers in the global cloud – and ensuring full protection of data.

Demand for multi-cloud and hybrid infrastructure will grow as companies reassess their cloud usage.  Many organizations are reassessing where they are hosting certain workloads and how best to optimise IT budgets.  We expect a majority of firms to embrace a hybrid approach to their cloud infrastructure needs.  This means a dramatic decrease in enterprises’ on-premises infrastructure in the next 2 years.

Such Hybrid Cloud Computing will begin to take centre stage with services spanning public, private and edge environments.  This will enable faster scaling up for business globally too.  The shift to hybrid cloud as the global standard means there will increasingly be a blurring of the lines between the public cloud and the traditional data centre.

The shift to an On-Demand service for hybrid cloud computing means organizations will have more freedom of choice for their budgets/IT spending, providing far more user flexibility.

We continue to see far greater integration of Cloud Computing with Big Data, and IoT services.  The changing IT landscape means Cloud computing will likely serve as a common workspace for IoT, plus the source of big data.

 

 

Constituent News

Below we highlight some of the best performing cloud computing 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 among our top performers for the year and remain in our Top 10.  This broader Cloud definition, includes all cloud communications, ensuring SKYY is one of the most diversified cloud offering - across all 4 key cloud areas of Infrastructure, Platform and Software as a Service, plus Security.   The US weighting at 92.4% has dropped in recent months, given the rise of Asian players primarily.

Top Performing SKYY Contributors – December 2020

Top 10 Constituents

Weight

Twilio Inc.

5.14%

Apple Inc.

4.78%

NVIDIA Corp

4.52%

Zoom Video

4.27%

Palo Alto Networks Inc.

4.14%

Alphabet Inc.

4.00%

Oracle Corp

3.90%

Amazon.com Inc

3.89%

Salesforce.com

3.88%

Adobe

3.76%

 

Regional Breakdown

Weight

North America

92.40%

Europe

3.18%

Asia

4.42%

Source: FactSet/Solactive and Bloomberg Data as of 31/12/20

 

Name of Holding

% Average Weight

Total Return (%)

Contribution to Return (%)

CROWDSTRIKE HOLDINGS INC - A

3.28

38.19

1.05

RINGCENTRAL INC-CLASS A

3.42

27.58

0.80

PALO ALTO NETWORKS INC

3.85

20.91

0.74

APPLE INC

4.62

11.46

0.51

ORACLE CORP

3.78

12.08

0.44

FORTINET INC

2.30

20.53

0.44

ZSCALER INC

1.65

28.22

0.40

NETAPP INC

1.73

24.25

0.37

TWILIO INC - A

5.24

5.75

0.30

SAP SE

3.06

7.52

0.23

8X8 INC

0.36

74.36

0.19

ADOBE INC

3.73

4.52

0.17

HEWLETT PACKARD ENTERPRISE

1.91

8.40

0.16

KINGSOFT CORP LTD

0.55

28.51

0.15

ALARM.COM HOLDINGS INC

0.48

36.28

0.15

MICROSOFT CORP

3.61

3.90

0.14

CISCO SYSTEMS INC

3.27

4.02

0.14

Past performance is no guarantee of future performance

Source: Morningstar Direct Data as of 31/12/2020

 

Fund Details

HAN-GINSCloud Technology UCITS ETF, is a UCITS compliant cloud computing ETF domiciled in Ireland.

The SKYY Cloud ETF 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

SKYY SW

SKYY.S

IE00BDDRF924

CHF

Acc



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