Cloud Technology Monthly Report | March

29 March 2021

  • Cloud computing will be central to the post-COVID work habits        
  • Global public cloud infrastructure market will grow 35% to $120 billion in 2021[1]        
  • Multi and Hybrid Clouds will increasingly dominate as open architecture increasingly dominates public cloud usage        
  • AI and 5G are facilitating the expansion of Edge computing        
  • Cloud spending growth has far exceeded overall IT spend[2]        
  • Moderna's COVID vaccine used the Cloud to speed up trials.[3]        
  • By 2024, Cloud to reduce CO2 emissions by 1.6bn metric tons - if all data centres are designed for sustainability.[4]

 

Cloud Technology ETF (SKYY) Returns

February

12 Month*

0.83%

41.32%

Past performance is no guarantee of future performance. Source: Bloomberg, Solactive, HANetf *12 Month figures based on 29.02.20 - 28.02.21.

 

Performance Review

HAN-GINS Cloud Technology 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.

In February, SKYY’s largest contributors to performance included Intel (10.1% monthly return), Alphabet (10.7%), Twilio (9.3%), Fortinet (16.7%), HP (18.0%), Oracle (6.8%) and Dell (11.22%).  These companies are benefiting from the significant demand for Cloud services due to the pandemic and work from home phenomenon.  They are amongst the largest weighted holdings in the portfolio. 

Key Cloud trends includes the fast-growing Healthcare sector, as hospitals increasingly switch to Virtual services and telemedicine.  Cloud security services have seen a big spike in demand due to cybersecurity concerns, tripling to $1.5bn by 2027[5].

Following a strong January performance for Cloud Security players such as Crowdstrike and Zscaler, February saw generally more muted returns, with SKYY returning 0.83%.  For 2021 it is up 2.5%, while over the past 6 months it has gained 8.0%.

Past performance is no guarantee of future performance. Source of all data: GinsGlobal/ Bloomberg.

In 2021 big Cloud trends include moves to more hybrid/multi-cloud platforms and infrastructure.  This will allow large companies to increasingly adopt cloud services across their various units globally, allowing the easy flow of data across multiple Clouds.  IBM (up 1.2%) is seeking to become the largest hybrid cloud player, on the backs of its $35bn Red Hat acquisition.

Holdings

% Average Weight

Total Return (%)

Contribution to Return (%)

Teradata Corp

0.44

49.07

0.14

Avaya Holdings Corp

0.28

33.41

0.07

Hewlett Packard Enterprise

1.76

17.99

0.29

Fortinet Inc

2.17

16.65

0.33

Beijing Sinnet Technology-A

0.28

15.29

0.04

Extreme Networks Inc

0.25

13.35

0.03

Eplus Inc

0.20

12.52

0.02

Dell Technologies -C

2.01

11.22

0.21

Alphabet Inc-Cl A

4.47

10.65

0.44

Intel Corp

4.85

10.14

0.46

Montnets Cloud Technology

0.19

9.91

0.02

Insight Enterprises Inc

0.28

9.84

0.03

Twilio Inc - A

4.23

9.31

0.34

Oracle Corp

3.63

6.75

0.24

Past performance is no guarantee of future performance. Source:  Solactive. Data as of 28.02.21

 

HAN-GINS Cloud Technology UCITS ETF

– Performance As of 28.2.21

 

1M

3M

6M

YTD

12M

SI

HAN-GINS Cloud Tech UCITS ETF

0.83%

6.85%

8.02%

2.50%

41.32%

57.43%

Solactive Cloud Technology Index (NTR)

0.86%

6.98%

8.29%

2.57%

42.07%

59.36%

Past performance for the index is in USD. 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 / HANetf. Data as of 28/2/2021

 

Industry News

According to IDC Research, public cloud spending is expected to grow from US$229 billion in 2019 to US$500 billion in 2023, with a compound annual growth rate (CAGR) of 22.3%.[6]

The demand for hybrid cloud could lead the world’s biggest providers to partially break out from their walled garden approach.  Hybrid cloud benefits include speed, control, and security. In terms of speed, it optimizes the network to reduce the latency and speeds up the data so that it can reach where it needs to be.

Key players Amazon Web Services (AWS), Microsoft Azure, Google Cloud, and Alibaba, all reported record Cloud revenues for the 4th quarter 2020. By the end of 2021, we expect 60% of companies will utilise public cloud platforms and 25% of developers will use serverless.[7] Cloud native technology is driving enterprise digital transformation strategies.  Other key trends include:

Alibaba Cloud will take the No. 3 revenue spot globally, after Amazon Web Services (AWS) and Microsoft Azure.[8]

The percentage of worldwide IT spending dedicated to the cloud will continue to accelerate in 2021. Gartner predicts that worldwide public cloud spending by end-users will grow 18% in 2021 to $304.9 bn, up from $257.5bn in 2020.[9]

Cloud providers are also moving into promising emerging markets, such as Edge cloud and edge computing.[10],[11]

All of the major hyperscaler cloud providers are expanding their early IoT-focused edge services to support broader use cases at the edge beyond IoT,

Microsoft, Google, and AWS are collaborating with pharma firms to develop drugs fast & cheaply with AI and Cloud Computing.[12] Cloud computing is the centrepiece of the world’s technical response to the COVID-19 crisis.

 

Constituent News

Our Cloud computing ETF currently has 50 constituents, with the US country weighting at 91.3%. It is followed by Asia (4.8%) and Europe (3.9%).  Our US weighting has dropped in recent months, given the rise of Asian players primarily.

Alibaba is expected to become the world’s 3rd largest Cloud infrastructure player, overtaking Google Cloud later this year.  While Amazon and Microsoft posted record earnings, Google Cloud is spending big on its cloud infrastructure buildout, thus bleeding money.[13] 

 

Top Contributors – February 2021

Holdings

% Average Weight

Total Return (%)

Contribution to Return (%)

Intel Corp

4.85

10.14

0.46

Alphabet Inc-Cl A

4.47

10.65

0.44

Twilio Inc - A

4.23

9.31

0.34

Fortinet Inc

2.17

16.65

0.33

Hewlett Packard Enterprise

1.76

17.99

0.29

Oracle Corp

3.63

6.75

0.24

Dell Technologies -C

2.01

11.22

0.21

Nvidia Corp

4.13

5.58

0.21

Teradata Corp

0.44

49.07

0.14

Palo Alto Networks Inc

3.60

2.16

0.08

Avaya Holdings Corp

0.28

33.41

0.07

Beijing Sinnet Technology-A

0.28

15.29

0.04

Zscaler Inc

1.62

2.67

0.04

Ringcentral Inc-Class A

3.15

1.41

0.04

 

Past performance is no guarantee of future performance. Source: Solactive. Data as of 28.02.21

 

Outlook

Increasingly, the majority of IT corporate spend is moving away from non-Cloud onsite hardware to Cloud usage.  The slide below shows the trend clearly over the past 12 months.  While non-Cloud infrastructure has seen a reduction in revenues, data centre chip revenues and Hyperscale Cloud have seen significant revenue boosts during COVID.[14]

It is clear Hybrid Cloud Computing will increasingly take centre stage – with services across public, private and edge environments.  This enables ever faster scaling up for business globally.  We believe the shift to hybrid cloud as the global standard ensures there will increasingly be a merging of the lines between the public cloud and the traditional data centre. 

Artificial intelligence, analytics, IoT, and edge computing will likely be key differentiators among the top cloud service providers – along with serverless and managed services.

A growing demand for low-cost virtual cloud desktops is evident.[15]

This refers to the software requirements of a device being fully managed by cloud service providers. The user just has a screen and some basic hardware – with the rest of the processing power will be seamlessly handled by cloud-based services.

With virtual cloud desktop users only paying based on cloud usage, the high costs related to buying upgraded new hardware is eliminated.  Referred to as Desktop-as-a-Service, this model is already offered by Amazon via their Workspaces platform and Microsoft. Google also offers such functionality through its Chromebook devices. It can increase efficiency across an enterprise - by ensuring everyone is using up-to-date, synchronized technology.

For illustrative purposes only. Past performance is no guarantee of future performance. Source: Deloitte[16]

 

Product Details

HAN-GINS Cloud computing 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.

 

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