When transformation through the cloud is discussed, Amazon and Microsoft are often cited. They both revolutionised their business models by embracing the provision of cloud computing services, with Amazon Web Services (AWS) now having around a third of this lucrative global market, and Microsoft Azure accounting for one-fifth, based on figures provided by Synergy Research Group. AWS now generates about half of Amazon’s operating income, with Microsoft’s cloud operations now generating more sales that its Office suite of software.

“Cloud technology has certainly had a great impact over the last 10 years, but we are nowhere near the end of that growth cycle. Not even close.” said Mr Braun. The first wave has largely been characterised by the cloud used as a cost efficient, scalable way for multiple users to store and share files anywhere. Yet Mr Braun underlines that there is substantially more potential for the cloud than it being merely about accessing remote server space.

“The cloud enables information to be analysed and to generate insights in real-time on a global scale,” he said. This is achieved as data can be integrated more easily and with more reliability and a lower time lag. These are essential requirements when unlocking the potential of machine learning, artificial intelligence, and the Internet of Things.

It also provides the foundation for the so-called “Fourth Industrial Revolution” which will bring together physical, digital and biological spheres, going beyond the more basic IT driven automation we have seen to date. For investors, Mr Braun sees multiple options for them to gain exposure to this potential growth.

Tech enabler opportunities

The manufacturers of hardware components are the ultimate enablers of the cloud. “Semiconductors will be everywhere and in everything,” he noted: mainly ICT equipment but also cars, consumer electronics and for manufacturing/government use. The semiconductor industry is forecasted by Fortune Business Insights to grow by an average of 8% per annum between 2021 and 2028. Increasingly, these technologies will communicate with each other via the cloud, hence the likely boom in demand for data centre services, microcontrollers, processing units, memory chips and more.

Providers of cloud solutions

Cloud solutions providers, be it infrastructure and software, offer a further set of investment options. “We are seeing the move from a cloud-cost to a cloud-first world, and this underpins the potential long-term growth for providers,” said Mr Braun. This includes facilitating data storage cost savings and IT infrastructure consolidation.

AWS, Microsoft Azure and Google Cloud Platform account for about two-thirds of global market share, and investment in the US in this space dwarfs that in the rest of the world. Yet investment growth rates in other countries often match or exceed those seen in the US, suggesting that this market is ripe for disruption. “Moreover, the pandemic has accelerated the need for cloud infrastructure and software solutions, which we think should lead to enormous investment opportunities over the next 10 to 15 years across the entire cloud ecosystem,” said Mr Braun.

There are more than 20,000 software-as-a-service (SaaS) companies globally, according to Crunchbase. These firms rely on the cloud to offer clients cost-effective access to technology, yet only a handful have grown to become above $1bn in value firms. In all probability this points to under-invested potential. An example of the potential trajectory is Adobe. For the first half of the 2010s its share price under-performed the NASDAQ. However, this turned around when its cloud-driven monthly subscription model kicked in, with its share that has progressed two times faster than the NASDAQ over the same period.

Cloud beneficiaries

Identifying the beneficiaries of cloud technology is a further investment opportunity, and these can be anywhere. From energy, health care, agriculture, media, construction, utilities, manufacturing, education, transport, and government, the cloud offers potential of everything from substantial efficiency improvements through to full transformation.

For example, the world’s largest offshore wind farm developer Ørsted uses cloud technologies linked to sensors on its turbines. This makes these units easier to maintain, including with predictive monitoring to pro-actively reduce wear and tear. In agriculture, the cloud is driving the development of remote surveillance and intervention tools for crops and livestock, with the potential for driverless farming vehicles and other smart equipment.

“While the investment opportunity around the cloud seems endless, investors need to be selective, focusing on those activities which will benefit most for the Fourth Industrial Revolution,” said Mr Braun. He noted that this selection requires detailed research, and a diversified portfolio-based approach. “Ideally investors will have a well-balanced exposure to the cloud, avoiding excessive concentration in potentially higher valued stocks,” he said.

The cloud computing revolution is in its infancy, driving innovation in both tech and non-tech businesses. Investment opportunities abound. If you are interested in hearing about the Cloud from our experts? Click