The global cloud computing market is growing rapidly, receiving the impetus of demand on the background of the pandemic coronavirus and trends of the transition to remote work and training. Although the competition is high, there are three companies, investing in stocks which will be the right long-term solution.
Cloud computing, perhaps the most discussed investment topic in recent years. Research firm Gartner earlier predicted that the total cloud computing market will grow by 17% this year and reach $266 billion, but this was before global pandemic COVID-19 provoked even more interest and accelerated the pace of development of the industry.
At a recent conference, CEO of NVIDIA (NASDAQ: NVDA) Jen-Hsun Huang said, “At present, the main computational elements are storage servers, CPU servers and GPU servers that are created and managed hyperspace applications which simultaneously serve millions of users.”
In this new sector there are two main markets: enterprise software as a service (SaaS) and infrastructure as a service (IaaS).
The winner of the SaaS market is Microsoft (NASDAQ: MSFT) with a huge package of commercial software products such as Microsoft 365.
The market for infrastructure as a service (IaaS) are growing faster than SaaS, it is dominated by giants such as Amazon Web Services (AWS), Microsoft Azure, and Alibaba (NYSE: BABA).
At the same time, the huge success of these companies would not have been possible without the graphics processors (GPU) Nvidia, which provide the computing power of servers in the data centers of companies.
NVIDIA – the Foundation of the cloud market
Sales of NVIDIA all the major cloud providers become the basis of the company’s growth in recent years. The income of its affiliates of products for data centers increased from $339 million in 2016 fin. year to $2.99 billion in 2020 fin. year. At the same time, for the 1st quarter sales in this segment jumped by 80% (compared to the same period last year) and amounted to $1.14 billion
The last two shocks to growth Nvidia should be selling the new high-performance server graphics processor A100 and business revenue Mellanox.
GPU A100 will use Alibaba’s Cloud, AWS, Baidu Cloud, technology, Dell, Google, Google Cloud and Microsoft Azure. Power A100 is designed to handle the most demanding high-performance workloads, such as applications for artificial intelligence.
In addition, NVIDIA has recently completed the acquisition of Mellanox, a leading provider of switches, cables and other networking solutions for data centers. Business Mellanox, according to expectations, will allow NVIDIA to increase their total revenues by 41% in the second quarter to approximately $3.65 billion
Commenting on the latest financial report, Huang said, “I think that the accelerated cloud computing is a movement that will be many years if not a decade of transition.”
Given the long transition cycle when organizations move from on-premises servers to the cloud, and a high rating of Nvidia stock on wall Street, investors should not fear, adding this action to your portfolio.
Microsoft is striving for superiority
Microsoft is a market leader in enterprise software as a service SaaS and ranks second after the Amazon in the market of cloud infrastructure. In this case, the Microsoft’s share on the global market for cloud infrastructure over the past year increased from 16% to 18%.
“We have more data centers across regions than any other cloud provider, and this quarter we announced new data centers in Mexico and Spain,” said CEO Satya Nadella during the last report. “Working with AI technologies clients are using our comprehensive tools, services and infrastructure to meet your unique objectives.”
Microsoft wins more major clients, having recently contracts from Coca-Cola (KO) and the National basketball Association.
For the quarter January to March 2020, income of commercial cloud Microsoft refers to the segment of Intelligent Cloud and Azure in particular, has increased by 39% (compared to last year’s value) to $13.3 billion.
In addition, the company has, according to recent data, huge free cash flow of $13.7 billion, which is 25% higher than a year earlier. This gives the technology giant a big opportunity for investments and acquisitions in cloud computing.
Alibaba is the leader in the Chinese market, seeking to expand in the world
Investment in cloud infrastructure Alibaba, perhaps the biggest in the world. As the leading digital platform in China and is actively developing in the rest of the world, with 780 million Chinese users of different business sectors (out of 960 million users worldwide), the company has set a goal to reach 20 billion by 2036.
Although Alibaba Cloud provides only 11% of total revenues, revenues of the cloud business increased by 58% year on year in the fourth quarter of 2020 fin. year. This growth was driven by demand for video streaming and the widespread use of remote work and learning during a pandemic COVID-19.
Commenting on the recent fin. the report Alibaba CEO Daniel Zhang said: “We believe that a pandemic will further accelerate the digital transformation of enterprises. All industries, including the public sector, decides to move its technology infrastructure to the cloud”.
Although in these days of volatile stock markets and fragile economies, nothing is guaranteed, investing in a really high perspective, the company still looks the right decision.
The Motley Fool