Cloud computing has been a hot investing area lately thanks to higher demand and stupendous stock market gains of the industry players. It is a process in which data or software is stored outside of a computer, but can easily be accessed anywhere, at any time via the Internet. This idea is effective as it helps firms lower IT costs by eliminating the need for servers and related maintenance costs.

Also, cloud computing provides greater accessibility. Since everything is on the Internet, users can access any data or document at any moment. Needless to say, such advantages have given it an edge in the pandemic situation when major part of the world is working-learning-shopping-from home.

No wonder, Direxion recently launched bull and bear leveraged cloud computing ETFs for investors so that one can place bold bets on the ups and downs of this high-potential industry. The move is pretty new as there was no leveraged ETF as of now on this niche concept.

Inside the Newly Launched ETFs

The Daily Cloud Computing Bull and Bear 2X Shares ETFs (CLDL and CLDS, respectively) look to achieve 200%, or 200% of the inverse, of the daily performance of the Indxx USA Cloud Computing Index. Each charges 95 bps in fees.

The index is designed to track the performance of companies that are delivering cloud computing infrastructure, platforms and services. These companies permit on-demand computing services such as servers, storage, network, and operating systems over the Internet.

The index has company-specific concentration risks with Twilio receiving the highest share with 9.43% of exposure. Autodesk and Veeva Systems round out the top three positions with about 5.48% and 5.13% weight, respectively.

How Does CLDL Fit In a Portfolio?

Cloud computing and storage have given a boost to video conferencing, gaming, e-commerce shopping, remote project collaboration, online classes, editing, etc. It is being used in applications in social networking, messaging apps and streaming services (read: ETF Areas Thriving During Coronavirus Pandemic).

In the wake of the pandemic, cloud technology adoption has seen robust growth in sectors where the work-from-home initiatives helped sustain business functions. Globally, end-user spending on public cloud services is forecast to grow 18.4% in 2021 to a total $304.9 billion, according to Gartner.

The IT spending toward cloud will continue to remain steady in the aftermath of the COVID-19 crisis, with cloud projected to make up 14.2% of the total global enterprise IT spending market in 2024, up from 9.1% in 2020, per Gartner.

In fact, recent Gartner survey data shows that about 70% of organizations using cloud services today intend to boost their cloud spending in the future as the COVID-19 crisis has strengthened its necessity. No wonder, such a situation is great for investing in leveraged cloud computing ETF like CLDL.

How Does CLDS Fit in A Portfolio?

Since the COVID-19-crisis has pushed up cloud stocks materially in recent trading, overvaluation concerns are rife. Global X Cloud Computing ETF (CLOU Quick QuoteCLOU - Free Report) , which added 64.9% past year, currently has a P/E of 83.41X. Another ETF First Trust ISE Cloud Computing Index Fund (SKYY Quick QuoteSKYY - Free Report) , which has gained 51.9% past year, has a P/E of 28.34X. This comes in comparison with 23.79X P/E of SPDR S&P 500 ETF (SPY Quick QuoteSPY - Free Report) and 28.5X P/E of Technology Select Sector SPDR Fund (XLK Quick QuoteXLK - Free Report) .  

This indicates a correction anytime soon, especially if there is growing rollout of vaccines and a decline in new COVID-19 cases (which means sooner-than-expected return to normalcy and lesser dependence on the work-and-learn-from-home culture). If this happens, this inverse leveraged fund CLDS would help investors garner smart gains.

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>