"The cloud" may have entered people's collective consciousness several years ago, but it's not a trend that's over. In fact, one Fidelity manager says it could continue to reshape technology infrastructure for many years.
"Cloud computing is helping tech-savvy companies scale up their disruptive business plans quickly, which is why it isn't going away anytime soon," says Ali Khan, analyst for Fidelity® Disruptive Technology Fund (FTEKX) and co-sector leader of the technology team.
The fund invests in innovative business models, emerging industries, and technologies that the investment team believes have the potential to disrupt or displace incumbents over time.
As Khan explains, growing companies want to focus on business plans that can take market share, rather than buying hardware and software and building data centers.
For this reason, most newer firms house all or most of their tech infrastructure in the cloud. The majority leverage data centers built by Amazon (AMZN), Microsoft (MSFT), and Alphabet (GOOG), parent company of Google, to do so. Each was a major fund holding as of July 31.
Established firms that also want to scale their businesses, lower overall costs, and allow customers, partners, and employees to access data and applications from almost anywhere are moving larger portions of their infrastructure to the cloud as well, Khan says.
"In addition, I think remote working due to COVID-19 is actually accelerating the move to the cloud in many industries," he says.
Khan believes the average person could use more than a dozen cloud-based services every day without even realizing it.
Lastly, Khan sees growth potential for application software companies that operate mainly or entirely in the cloud. Examples, he says, include human resources software-as-a-service provider Workday (WDAY), which, according to Khan, also is expanding into finance- and enterprise-management software, and Zendesk (ZEN), which offers an online system to help companies solve helpdesk tickets faster. Each was an outsized fund holding as of the end of July.
"You may have heard about cloud computing years ago, but I'm still finding investment opportunities tied to this disruptive trend that are very much in the now," he says.
Fidelity® Disruptive Technology Fund (FTEKX) held securities mentioned in this article as of its most recent holdings disclosure. For specific fund information such as standard performance and holdings, please go to the fund ticker symbol link on this page.
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