How to Invest in the Giant Computer in the Sky? A Final Deep Dive into the WCLD ETF (ft. Okta)

From the smartphone apps we use every day to the core data management systems of corporations, modern society is deeply dependent on a massive network infrastructure called cloud computing. Cloud computing is a technology that stores data via the internet and allows you to access it anytime, anywhere, as needed, and it is regarded as a key driver of the digital transformation era. As the cloud computing market grows, interest has also been heating up around thematic ETFs that allow investors to tap into this trend.

The ETF we will examine today is the WisdomTree Cloud Computing Fund (WCLD). This ETF focuses on companies that provide cloud computing technologies and services. Using Okta (OKTA), a leading cloud-based identity management company, we will take a closer look at the ETF’s characteristics and the key points to consider before investing.

The WisdomTree Cloud Computing Fund (WCLD) aims to invest in companies within the cloud computing space that have high growth potential.

Key features:

The WisdomTree Cloud Computing Fund (WCLD) is an attractive ETF that allows investors to gain exposure to the innovative growth of the cloud computing market—particularly to “emerging” companies that may lead the next generation of cloud services beyond today’s tech giants. The BVP Nasdaq Emerging Cloud Index that WCLD tracks does not focus on traditional large-cap tech names, but instead on fast-growing cloud computing–related companies, offering the potential for higher growth.

However, investors should keep the following aspects in mind.

1. Growth potential and embedded risks of “emerging cloud” companies: Looking at WCLD’s top holdings, companies such as Okta (identity management), AppFolio (cloud-based business software), Veeva Systems (cloud solutions for the life sciences industry), and Zscaler (cloud security) dominate the portfolio. These companies have strong growth potential, but they also carry risks: many are still not highly profitable, and they may be vulnerable to intensifying competition.

2. Intensifying competition and niche-market strategies: In cloud computing, large platform providers already command powerful market positions. The companies included in WCLD, however, pursue strategies that target niche markets by focusing on specific industries or functions. For example, Veeva Systems offers cloud solutions tailored to the pharmaceutical and life sciences sectors, while Okta holds a leading position in cloud-based identity management. Investors should pay close attention to these companies’ specialization and growth prospects.

3. Impact of stronger data sovereignty and regulatory changes: In recent years, governments around the world have been pushing data sovereignty policies that strengthen control over their citizens’ data. For cloud computing companies, this can translate into additional regulatory compliance burdens, and it may have an even greater impact on “emerging cloud” companies whose business models rely heavily on cross-border data processing.

Overseas experts’ views on the cloud computing market and the WCLD ETF can be summarized as follows.

Barron’s, a leading U.S. financial publication, reported on the WCLD ETF, saying that

He notes this as a defining trait of “emerging cloud” companies, which combine strong growth potential with the challenge of achieving profitability.

Meanwhile, technology research firm Gartner evaluates that the cloud market still offers ample room for growth for companies with deep expertise in specific niches, and that the WCLD ETF is well aligned with this trend. In particular, it sees strong investment appeal in WCLD ETF’s exposure to cloud-based security, data analytics, and industry-specific solutions.

The WisdomTree Cloud Computing Fund (WCLD) is an intriguing way to gain exposure to the future growth potential of the cloud computing market. In particular, it offers the advantage of investing not only in established large cloud providers but also in “emerging” cloud companies armed with innovative technologies and ideas. However, investors should keep in mind that, alongside high growth expectations, there are also risks such as elevated volatility, intensifying market competition, and regulatory shifts including stronger data sovereignty rules.

Therefore, before investing in the WCLD ETF, you should carefully review the business models and growth strategies of these “emerging cloud” companies and make investment decisions prudently, in line with your investment objectives and risk tolerance.