Cloud Stocks Down to Start 2022
Investors Souring on Cloud Stocks
Cloud software stocks continue to slump as concerns over rising interest rates are weighing on the tech sector. Over the past five years investors have enjoyed steady gains in cloud-computing services, with stocks posting some of the technology sector’s biggest advances. This was only helped by the pandemic, as businesses, schools, and government agencies alike moved towards remote work and collaboration.
Throughout the pandemic a number of software-as-a-service stocks posted over triple-digit gains. Video chat service Zoom (ZM), ecommerce vendor Shopify (SHOP), and esignature company DocuSign (DOCU) all posted significant revenue growth. The recent trends reflect the changing market, as cloud stocks as a whole are down 29% since November, which was their collective high-water mark.
Issues Facing Cloud Stocks Common Across Tech Sector
Last year’s gains illustrated the long-term growth potential in tech and cloud services given the changing trends and circumstances post-pandemic. Still, analysts say the tech sector faces present challenges that are hitting cloud software companies especially hard. Higher interest rates mean lower future cash flow, and many cloud software companies don’t yet turn a profit.
The Fed’s December meeting indicated the easy money policy in place since the start of the pandemic is likely to end soon. Changing interest rates tend to greatly impact high-growth software stocks. Last week’s 6% drop for the WisdomTree Cloud Computing Fund represented the second-steepest since COVID-19 first hit.
Dip in Tech and Cloud Stocks a Buying Opportunity for Many
Some industry watchers believe the downward trend on share prices for cloud software stocks and the tech sector in general may represent a potential buying opportunity. Analysts reiterate that despite the impact of interest rates, the fundamentals behind cloud computing remain the same.
Market watchers urge patience and long-position investment when it comes to cloud stocks. While the Nasdaq index has routinely whipped the Dow in recent years, the first week of the new year saw a reversal in the trend. Cloud stocks in particular contributed to the Nasdaq’s decline. The market is clearly reacting to the Fed’s signals that interest rates will soon rise.
Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Adviser
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.