“Cyber Space” or “the Cloud” is the Hottest Investment Trend

Cloud computing may not look risk-free now but may prove to be an intelligent investment in 2012

Nowadays, “the cloud” has become one of the hottest investment trends in the world. It even has its own exchange traded fund, over the last three years the index on which that exchange traded fund and other investment products have been based has expanded drastically.

But this index has been on a bumpy ride and the index now hovers 15.6% below its highs for the year. Some people are of the opinion that it’s worth taking the risk to gain profit from the explosion in the cloud computing arena. This trend of making investment is not going any time soon Technology research giant Gartner forecast that:

“The demand for cloud computing services could be worth $102.1 billion in 2012, up from $68.3 billion last year.”

The potential of the cloud business is tougher to realize and requires more investment than anticipated. IBM has plenty of other businesses that will pull up the slack and still generate returns for investors and IBM has already pledged to deliver $7 billion in annual revenues from its new cloud-based businesses by 2015, nearly double current levels.

The data has to live somewhere, and Digital Realty Trust (DLR) is a real estate investment trust that has become one of the biggest developers of data centers from Main Street, USA to overseas markets like Singapore. True, the data center market looks crowded and companies like Facebook, Google and others are building their own data centers. As a major player in the sector, Digital Realty could emerge as a consolidator or an acquisition target and in the meantime, as a REIT, it yields a very attractive 4 percent or so annually. Yes, the shares look pricey in absolute terms, but they are still less expensive than some pure plays like Rackspace.

The trend in the cyber cloud and its investments is irresistible and this trend is likely to be intact for a long time as long as companies are getting benefits by it. Dabbling in cloud computing stocks isn’t likely to become straightforward and risk-free any time soon either. With a bit of creativity, investors can find ways to play it that give them exposure to the upside while limiting the worst of the volatility.

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