Over the past 10 years, cloud computing has already considerably transformed the IT landscape, allowing new digital services and practices to develop. As an illustration, one need only imagine how different our experience of the pandemic would have been without the many cloud services that are now available.

Driving the digital revolution

“The cloud is now much more than just a space for storing the growing volumes of data we generate,” explains Christophe Braun, an investment specialist at Capital Group. “It’s much more than just an intangible hard drive. We have to see it as a catalyst for fusing three worlds: the physical world around us, which is increasingly connected; the digital world in our hands, which we access through smart devices; and the biological world inside us, with digital technology making it possible to continuously monitor our physical condition, the quality of our sleep, and so on.”

Humanity produces increasingly substantial volumes of data that can no longer simply be stored on individual hard drives. For example, we generate half a billion tweets and send 500 billion emails every day. In addition to the information produced directly by humans, more and more of the smart devices that surround us operate in ecosystems, exchanging an ever-expanding volume of data with each other. “A self-driving car produces 5 terabytes of data per hour of use,” says Braun. “In the future, an increasing number of the devices in our homes will be interconnected. We need to identify solutions for storing all of this information and processing it.”

Long-term growth prospects

For investors, understanding these changes helps identify opportunities for future value creation. Capital Group sees cloud technology as a core part of the data-driven economy that is transforming the world and its markets. “You have to look at it as a platform that will support the emergence of innovative new solutions that can redefine how value is created,” says Braun. “The cloud has already greatly impacted the economy over the past 10 years, leading to significant growth, but we are nowhere near the end of that growth cycle.”

The cloud is the source of new models, integrating innovative technologies like machine learning, artificial intelligence and the Internet of Things. “We expect enormous opportunities for the next 10 to 15 years across the entire cloud ecosystem,” adds Braun. “These opportunities apply to component manufacturers and the semiconductor industry as well as solutions providers, such as Amazon Web Services and Adobe, and more creative businesses developing new products and services. Lastly, we shouldn’t underestimate innovators who will turn to cloud options to disrupt their industry and create long-term value.” There are significant opportunities to use cloud technology in the energy management sector, agriculture, transportation and logistics, for example.

Selectivity is key

How can investors identify which companies will come out ahead? “That can certainly be a challenge. Not every company in the cloud space will end up being a winner,” says Braun. “You have to be selective, looking at each company’s fundamentals and, in particular, its ability to adapt to and leverage this digital environment. And, as with any investment, it’s important to stay alert and make sure your exposure is well balanced, with an active investment solution often being the best way to achieve this.”

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