Q&A Series: From Hyperscalers to Neoclouds, Where Are the Cloud Computing Opportunities?

The rise of artificial intelligence is redefining what enterprise technology can achieve, with breakthrough models requiring unprecedented computational capacity. At the centre of this transformation is cloud computing, which has evolved into the critical backbone enabling both cutting-edge AI deployments and modern digital workloads at scale.

In this article, we share insights from First Trust on how the cloud ecosystem is evolving alongside AI adoption and how investors can benefit across the cloud value chain.

Introducing First Trust Cloud Computing ETF

The First Trust Cloud Computing ETF (NASDAQ: SKYY) is a passively managed fund that tracks the ISE CTA Cloud Computing™ Index. It invests in companies across three cloud computing categories: Infrastructure as a Service (IaaS), which provides cloud infrastructure, Platform as a Service (PaaS), which offers platforms for software development, and Software as a Service (SaaS), which delivers end-user software applications over the internet.

Table 1: Key information about the ETF

ETF Details
Underlying Index	ISE CTA Cloud Computing™ Index
Base Currency	USD
Trading Currency	USD
Nasdaq Ticker	SKYY
Listing Date	5 July 2011
Number of Holdings	65
Assets Under Management	USD 3,542,648,031
Trading Board Lot Size	1 unit
Total Expense Ratio	0.60%
Dividend Distribution Frequency	NIL
Source: First Trust. Data as of 26 Oct 2026

1. What are the key growth drivers for cloud computing over the next few years? Beyond AI, what other trends support growth?

We believe AI is clearly an accelerant, but cloud growth is broader than AI. Enterprises are still migrating workloads from on-premise infrastructure to the cloud, while cybersecurity, data growth, digital transformation and the increasing use of cloud-based applications continue to drive demand across IaaS, PaaS, and SaaS. Gartner's latest forecast highlights particularly strong growth in IaaS as enterprises scale AI inference workloads, while PaaS is benefiting from greater orchestration requirements.

2. How do you see competition evolving between hyperscalers and specialised neoclouds?

We do not necessarily view this as a winner-takes-all battle. Hyperscalers such as Microsoft, Amazon and Alphabet, for example, benefit from tremendous scale and broad integrated ecosystems, while specialised providers can compete by focusing on particular workloads, customers or high-performance AI infrastructure. Importantly, SKYY can participate in both, with Microsoft, Alphabet, Amazon, DigitalOcean and CoreWeave all currently among its larger holdings as of 23 October.

3. Is AI a durable tailwind, or could the cloud industry face overbuilding followed by digestion? What should investors watch?

We think AI can be a durable cloud tailwind because the opportunity is increasingly moving beyond model training towards recurring inference as AI becomes embedded in everyday applications and workflows, in our view. Gartner expects AI-optimised IaaS spending to rise 96% in 2026 and another 56.5% in 2027, with inference already surpassing training spending in 2026¹. Investors should watch actual cloud revenue, utilisation and returns on infrastructure investment to ensure demand continues to justify the extraordinary capital spending taking place.

¹ Gartner, 2026

4. Could you walk us through the ISE CTA Cloud Computing Index methodology, including why IaaS, PaaS and SaaS receive different weights?

Eligible companies must be classified as cloud companies by CTA and meet size, liquidity and free-float requirements. They then receive a cloud score of 3 points for IaaS, 2 for PaaS and 1 for SaaS, with a maximum score of six; securities are weighted according to their share of the aggregate cloud score, subject to a 4.5% maximum weight. The greater emphasis on IaaS and PaaS reflects their foundational role in enabling cloud computing and helps prevent the portfolio from becoming predominantly a SaaS or software fund. Please see the fund’s prospectus for more information regarding the index methodology.

5. Could you share some insights into a few of SKYY’s top holdings?

One of SKYY's strengths is the diversity within its leading positions, in our view: Microsoft, Alphabet and Amazon provide exposure to the major hyperscale platforms, while DigitalOcean represents a more specialised cloud provider and Arista Networks supplies networking infrastructure supporting cloud environments. Other significant exposures include Oracle, IBM, CoreWeave and Nutanix, illustrating that SKYY reaches across the cloud ecosystem rather than simply owning the largest technology companies*.

*As of 23 October 2026. References to specific securities should not be construed as a recommendation to buy or sell and should not be assumed profitable.

6. What role can SKYY play in an investor’s portfolio relative to a broader technology ETF?

We see SKYY as a targeted satellite allocation alongside a broader technology exposure. A conventional technology ETF is generally driven by the largest technology companies, whereas SKYY deliberately targets the cloud ecosystem across infrastructure, platforms and software, providing exposure not only to hyperscalers but also to specialised companies such as DigitalOcean, Nutanix, CoreWeave, Cloudflare and MongoDB.

7. How does SKYY compare with other cloud computing ETFs, such as the WisdomTree Cloud Computing Fund, Fidelity Cloud Computing ETF and Global X Cloud Computing ETF?

SKYY systematically covers IaaS, PaaS and SaaS and weights companies according to their cloud score rather than functioning primarily as a cloud-software portfolio. SKYY spans hyperscalers, AI infrastructure, platforms and SaaS; this provides a more comprehensive way to invest in the long-term cloud theme. Eligibility and weighting approaches differ, making methodology and portfolio composition important points of comparison.

Sources

•  First Trust: SKYY fund summary and index methodology: 
  https://www.ftportfolios.com/retail/etf/etfsummary.aspx?Ticker=SKYY
• First Trust: SKYY current holdings:
  https://www.ftportfolios.com/retail/etf/ETFholdings.aspx?Ticker=SKYY
• Gartner: Public Cloud Services Forecast, 2024-2030:
  https://www.gartner.com/en/documents/8045433
• Gartner: AI-Optimized IaaS Spending Forecast:
  https://www.gartner.com/en/newsroom/press-releases/2026-08-10-gartner-forecasts-worldwide-artificial-intelligence-optimized-iaas-spending-to-grow-96-percent-in-2026

Risks/Important information
You should consider the fund’s investment objectives, risks, and charges and expenses carefully before investing. Contact First Trust Portfolios Asia Pte. Ltd at +65 6027 9100 or visit www.ftglobalportfolios.com to obtain a prospectus which contains this and other information about the fund. The prospectus should be read carefully before investing.

References to specific securities should not be construed as a recommendation to buy or sell and should not be assumed profitable.

There is no assurance any forecasts will be achieved.

For Investors in Singapore

The Fund has not been registered with the Monetary Authority of Singapore. Accordingly, this document or any material in connection with the offer or sale, or invitation for subscription or purchase, of shares in the Fund may not be circulated or distributed, nor may shares in the Fund be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor pursuant to Section 304 of the Securities and Futures Act 2001 of Singapore (the “SFA”) or (ii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA

The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. Nor does the document implicitly or explicitly recommend or suggest an investment strategy, reach conclusions in relation to an investment strategy for the reader or provide an opinion as to the present or future value or price of any fund. First Trust has no knowledge of and has not been provided any information regarding any investor. Financial professionals must determine whether particular investments are appropriate for their clients.

Nasdaq® and ISE CTA Cloud Computing™ Index ("CPQ™") are registered trademarks and service marks of Nasdaq, Inc. (together with its affiliates hereinafter referred to as the "Corporations") and are licensed for use by First Trust. The Fund has not been passed on by the Corporations as to its legality or suitability. The Fund is not issued, endorsed, sold or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND.

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