As network connectivity improves worldwide, so does the ability to integrate wireless technologies like cloud computing. With these advancements, what were previously niche tech sectors have come to the forefront of the stock market. As the need for off-device computing increases with the push to bring artificial intelligence (AI) and large language models (LLMs) to things like laptops and smartphones, next-gen cloud stocks are emerging as potentially lucrative long-term holdings.
Yet, that’s not all these companies are good for. That’s because cloud computing is a broad term encompassing any kind of data processing or calculation that occurs on a device other than the one you’re using. You feed the offsite computer the information from your device, say your phone through an internet connection, and the offsite computer processes and returns that data to you on the same connection. This complex, yet practically invisible process now happens constantly across our personal and business devices, opening up several avenues of investment into its improvement and future.
Amazon (AMZN)
It is essentially impossible to discuss next-gen cloud stocks without mentioning the tech giant driving much of the industry: Amazon (NASDAQ:AMZN). While that may sound like a surprise to the uninitiated who still see Amazon as an e-commerce giant (which is still true as well), the major driver for its growth is now its cloud computing business through Amazon Web Services (AWS).
One of the big three cloud computing subsidiaries, AWS continues to impress investors with stunning categorial growth. For example, the first quarter of 2024 saw the AWS segment operating income increase to $9.4 billion, compared with an operating income of $5.1 billion for Q1 2023. That’s a stunning 84% increase year-over-year and has driven analysts to be exceptionally bullish about AMZN stock.
Should this quarterly revenue trend continue for AWS revenue, there is little doubt that AMZN will continue surging in value this year. That’s because Amazon has incredibly deep pockets thanks to its $73 billion in cash asset reserves. As such, it’s clear Amazon will continue investing in the tech that makes it number one among next-gen cloud stocks.
Oracle (ORCL)
While Amazon might be focused on overall infrastructure, Oracle’s (NYSE:ORCL) approach to cloud computing targets the enterprise-level customer more specifically. The company, which is known for its business management software has spent the last decade developing a full suite of applications that run exclusively on the company’s cloud environment.
The advantage to this approach is that Oracle’s customer base is incredibly broad, with it having the ability to provide its services to nearly any business that needs them and can afford them. This is because of the highly efficient computing infrastructure Oracle owns, which allows it to run these applications remotely for display on any machine. As a result, Oracle’s customers don’t need expensive on-site servers or computing capabilities to use its software.
This successful approach to cloud computing has resulted in 84% and 83% of Oracle’s total revenues in fiscal 2024 and 2023. It’s also a big driver of what is keeping ORCL stock relevant among next-gen cloud computing stocks in a highly competitive industry.
Snowflake (SNOW)
Adding a wildcard to the discussion of next-gen cloud stocks, Snowflake (NYSE:SNOW) is certainly the riskiest of the three stocks mentioned in this article. This stems from its relatively short history as a publicly traded company. SNOW has risen in value and relative fame over the last two years since going public due to its exciting approach to cloud computing and data processing.
That’s because the company markets itself as a novel data-as-a-service provider, aiming to collect data from customers, store it in its cloud data centers, and process it for trend evaluation. While this may seem esoteric to the average consumer, for massive enterprises, it can uncover invaluable inefficiencies and areas for improvement.
Though the company is still in its growth stages and investing significant capital into scaling its operations, it could become a runaway hit should the artificial intelligence industry blossom into what some analysts expect it to.
On the date of publication, Viktor Zarev did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.