Many investors still don’t understand what a cloud even is, let alone a cloud computing stock. Clouds are networks of hyper-scale data centers, built with commodity hardware and open-source software, that enable the creation of scaled, global services delivered over the internet. Still, figuring out which cloud computing stocks to buy requires a big-picture look at the top companies.
I divide cloud stocks into three types:
- Cloud Czars, the owners of the biggest data centers, which now dominate the global economy.
- Cloud Service Companies, which these clouds (and other, smaller ones) to deliver scaled services to consumers and businesses, selling them by subscription.
- Cloud Retinue, companies that serve the cloud with products or services essential to maintaining the resource.
During most of 2018, it was the Czars that dominated the market, but most have had a lousy second half of the year. You know them well by now — Apple (NASDAQ:AAPL), Amazon.com (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), Alphabet(NASDAQ:GOOG, NASDAQ:GOOGL) and Facebook (NASDAQ:FB). Among these five companies are $3.5 trillion in market cap.
That’s the problem with the Czars. People fear them. Politicians want them broken up, or at a minimum they want them bound by expensive regulations, and this will continue to hurt the stocks.
Cloud service companies use cloud connectivity provided by another company in their business model. Think Netflix (NASDAQ:NFLX) or Salesforce.com(NASDAQ:CRM). They may serve either businesses or consumers. They use the economics of the cloud to reach global markets, replacing products like DVD players or corporate data centers. The best offer applications that were previously unimaginable.
The cloud retinue is a term I created for this story. These are the suppliers of hardware, software and services to both the Cloud Czars and big customers now adapting to the reality of the cloud. Intel (NASDAQ:INTC) is part of the cloud retinue. So is Dell Technologies (NASDAQ:DVMT). Cloud retinue companies may also serve other markets, but it’s largely the cloud they’re pointing to for the future, which is what makes them the top cloud computing stocks to buy.
Beyond these obvious choices, the cloud retinue includes data centers that connect clouds to one another and companies that deliver essential software as a service to both the public clouds of the Czars and the thousands of private clouds now replacing corporate data centers.
The retinue may offer the best gains of any group in 2019 because they can fly under the radar of casual investors while delivering fat returns.
In this gallery, you’ll find examples of all three types of cloud computing stocks. It’s not an exclusive list by any means, and it may also become very misunderstood because everyone in 2019 will want to call themselves a cloud play. For the full story visit investorplace.com.