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Article Highlights
- Cloud computing is expected to undergo a compound annual growth rate of 16% through 2033.
- As Cloud 3.0 becomes a reality, the Fidelity Cloud Computing ETF is likely to build on its 49% gain since the market bottomed last April.
- The fund sports a low volatility beta of 1.01 and is assigned a Moderate Buy rating by analyst consensus.
Since Amazon (NASDAQ: AMZN) launched Amazon Web Services, or AWS, in the early 2000s, tech companies have been jockeying for cloud computing market share.
But over the past year, for the stocks of companies involved in cloud computing, the results have been mixed at best. For investors looking to maximize gains as cloud computing evolves, an exchange-traded fund (ETF) with cloud exposure could be the best bet.
The Fidelity Cloud Computing ETF (BATS: FCLD) fits the bill. After a year of mediocre gains that trailed the broader market, and with the next iteration of the cloud on the horizon, the FCLD could be in store for an outsized performance in 2026.
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Preparing Your Portfolio for Cloud 3.0
That next iteration is welcome news to growth investors who fear that they may have missed the boat with cloud computing. The technology—although now commonplace across industries—is rapidly evolving and demanding recurring CapEx from large-scale enterprises.
According to industry consultancy firm Grand View Research, in 2025 the global cloud computing market was estimated at nearly $944 billion, and by 2033 it is forecast to grow to approximately $3.35 trillion—good for a compound annual growth rate of 16%.
Grand View cites major tailwinds, including “the ongoing shift from legacy on-premises infrastructure to more scalable, flexible, and cost-efficient cloud environments.” Additionally, in order to address needs and remain competitive, companies across industries are modernizing applications, consolidating data platforms, and adopting dynamic and AI pricing models that reduce CapEx and accelerate efficiency improvements.
Cloud 3.0 represents the next phase of that cycle. The term refers to the third major evolution of cloud computing, which is characterized by AI integration, advanced automation, distributed infrastructure, serverless microservices, and API and web service orchestration.
A 2020 white paper authored by Navdeep Alam, senior director of global data warehousing for IQVIA, argues that “emerging Cloud 3.0 technologies will disrupt application development in organizations across all industries … To take advantage of Cloud 3.0, CIOs and CTOs must deploy a new enterprise architecture and upgrade their processes and technologies.”
That shift creates an environment in which innovators in the Software-as-a-Service, or SaaS, and Platform-as-a-Service, or PaaS, spaces can cater to those enterprise software needs and, in turn, see top-line growth accelerate.
A Well-Balanced, Low-Volatility Cloud Computing ETF
Launched on Oct. 5, 2021, the Fidelity Cloud Computing ETF caters to investors looking to take advantage of that environment.
But rather than having to identify individual potential winners, the fund pools together the top names in the space, providing exposure to the who’s who of cloud computing, SAAS, PaaS, AI data management, and workflow automation.
Over the past year, the fund has gained just 8.55%, but since the market-wide tariff tantrum last April, the FCLD is up nearly 49%.
The ETF’s objective is to provide returns that correspond to the performance of the market-weighted Fidelity Cloud Computing Index.
In doing so, the FCLD provides incredibly well-balanced weightings that provide a risk-off, lower volatility approach to individual cloud stock investing. Its top-five holdings by allocation include:
The ETF’s ninth-largest holding, Workday (NASDAQ: WDAY), is used by more than 11,000 customers, including more than 65% of the Fortune 500 companies. Meanwhile, the fund’s tenth-largest weighting, Sandisk (NASDAQ: SNDK), was one of last year’s top-performing stocks, and over the past year, its shares have gained more than 977%.
Drilling further down into its holdings, Amazon, Docusign (NASDAQ: DOCU), and Datadog (NASDAQ: DDOG) all have weightings between 2.83% and 1.88%.
That degree of balanced allocations results in a beta of 1.01, meaning the FCLD’s volatility barely exceeds that of the S&P 500, providing a lower risk, lower volatility alternative to individual cloud stock investing.
Institutional ownership, although light, has seen buying exceed selling in 9 of the last 10 quarters, with inflows of $3.26 million surpassing outflows of $3.07 million over the past 12 months.
Its expense ratio stands at 0.4% and its nearly $91 million in assets under management and daily trading volume of 18,934 shares mean liquidity can be light at times. But the fund receives an aggregate Moderate Buy rating based on 746 analyst ratings issued in the past year covering 23 companies in the FCLD’s portfolio.
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