5 Best Cloud Computing Stocks Heading into 2023

In this article, we will discuss the 5 best cloud computing stocks to buy heading into 2023. If you want to explore similar stocks, you can read 15 Best Cloud Computing Stocks Heading into 2023.

5. ServiceNow, Inc. (NYSE:NOW)

Number of Hedge Fund Holders: 103

ServiceNow, Inc. (NYSE:NOW) is a leading provider of cloud-based services and solutions in the enterprise software space, and it has seen tremendous growth in recent years. The company has a strong and growing customer base, which is reflected in its growing revenue and market share. Additionally, ServiceNow, Inc. (NYSE:NOW) has a strong balance sheet with low debt levels. ServiceNow, Inc. (NYSE:NOW) has free cash flows of $1.89 billion and a debt-to-equity ratio of 0.32, as of September 30. The company is also expanding into new markets and is investing heavily in research and development, which should provide a long-term boost to its growth prospects.

On November 17, Morgan Stanley named ServiceNow, Inc. (NYSE:NOW) as his “Top Pick” and reiterated an Overweight rating and his $520 price target on the shares.

At the end of Q3 2022, 103 hedge funds were long ServiceNow, Inc. (NYSE:NOW) and held stakes worth $4.26 billion. Of those, Tiger Global Management LLC was the top investor in the company and held a position worth $639.7 million.

Here is what Aristotle Atlantic Partners, LLC had to say about ServiceNow, Inc. (NYSE:NOW) in its third-quarter2022 investor letter:

“Underperformance in the third quarter can be attributed to ServiceNow, Inc. (NYSE:NOW)’s slight miss on the second quarter earnings and guidance that was lower than expected for its third quarter outlook. The company is facing headwinds from the weaker macroeconomic conditions and a tempered outlook resulting from elongated sales cycles and an overall slowing software spending environment. These worsening conditions were highlighted by many software companies during the second quarter earnings season. We expect this to be temporary for ServiceNow where the long-term thesis of the company’s platform strategy and relevance to digital transformation strategies remains intact. The stock was also likely impacted by the rapid increase in interest rates during the third quarter and the resulting contraction of multiples on high-growth software stocks.”

4. Salesforce, Inc. (NYSE:CRM)

Number of Hedge Fund Holders: 117

Salesforce, Inc. (NYSE:CRM) is a leading cloud-based software provider that offers Customer Relationship Management (CRM) solutions to businesses of all sizes. The company has established a large and loyal customer base, with over 150,000 customers across the globe. Salesforce, Inc. (NYSE:CRM) has a strong track record of delivering strong financial results. Salesforce, Inc. (NYSE:CRM) is one of the best cloud computing stocks to buy now.

This November, Stifel analyst J. Parker Lane revised his price target on Salesforce, Inc. (NYSE:CRM) to $185 from $200 and maintained a Buy rating on the shares.

At the end of the third quarter of 2022, Salesforce, Inc. (NYSE:CRM) was spotted on 117 investors’ portfolios that disclosed stakes of $8.21 billion in the company. This is compared to 116 positions in the previous quarter with stakes worth $7.90 billion. The hedge fund sentiment for the stock is positive. As of September 30, Fisher Asset Management is the top investor in the company and has a position worth $1.83 billion.

Here is what Aristotle Atlantic Partners, LLC had to say about Salesforce, Inc. (NYSE:CRM) in its third-quarter 2022 investor letter:

“We sold Salesforce, Inc. (NYSE:CRM) to reduce our weighting in the Information Technology sector. Salesforce held their investor day, and the company reiterated their organic Fiscal Year 2026 revenue target of $50 billion. This target remains more back-end loaded based on current slowing macroeconomic conditions and requires new annual contract growth well ahead of what the company has been averaging for the past few years. We are skeptical that the company will be able to achieve this revenue target organically and see Merger & Acquisitions (M&A) being key to achieving the growth. While we believe Salesforce has shown good success in growing its non-CRM clouds, we do see more competitive pressures emerging for the Marketing and Customer Service Clouds, specifically on the pricing side during a global economic slowdown.”

3. Alphabet Inc. (NASDAQ:GOOG)

Number of Hedge Fund Holders: 156

Alphabet Inc.’s (NASDAQ:GOOG) cloud business is a rapidly growing business that is becoming increasingly important to the company’s overall strategy. The company’s cloud services are offered through Google Cloud Platform (GCP) and its suite of cloud-based products and services. GCP enables customers to build, deploy, and manage applications, websites, and other services on Google’s highly scalable and secure cloud platform.

On November 15, Morgan Stanley analyst Brian Nowak updated his price target on Alphabet Inc. (NASDAQ:GOOG) to $120 from $125 and reiterated an Overweight rating on the shares.

At the end of Q3 2022, 156 hedge funds were long Alphabet Inc. (NASDAQ:GOOG) and held collective stakes of $19.3 billion in the company. Of those, TCI Fund Management was the most prominent shareholder in the company and disclosed a position worth $5.04 billion.

Here is what Mayar Capital had to say about Alphabet Inc. (NASDAQ:GOOG) in its third-quarter 2022 investor letter:

“In early January this year – which admittedly feels like eons ago – US President Joe Biden was pushing Americans to take up the government’s offer of free COVID tests to help tackle the surging omicron variant. How did Biden respond when citizens asked about the availability of these tests?

“Google it!”

This advice, undoubtedly well-meant, was roundly scoffed at by the press, however. It seemed too obvious to be very helpful.

Anyway, the anecdote serves to introduce you to one of our largest holdings, Alphabet; the parent company of Google. Note that first, Alphabet’s original and core product – its search engine – has entered our common vocabulary as a verb. ‘Googling’ something has the same meaning as ‘researching’ or ‘finding an answer to’ something. Second the reason Biden’s advice was met with such opprobrium was because Googling something has become almost second nature to us now.

These two observations reveal a lot about Google’s strength in the search engine market, in which it has a share of over 90 percent. Because internet search is almost the prototypical network, Google has benefitted from – and we think is also protected by – the huge competitive advantage its scale brings – both to those asking the questions and those providing the answers. The Google search platform becomes increasingly useful to anyone seeking information as a greater volume of stuff becomes available. This starts a virtuous cycle that results in a colossal market share for Google itself. In the language of business strategists, Google benefits from vast network effects.

Because Google’s search results are viewed by billions of eyeballs every day, its search page ‘real estate’ is understandably very valuable to those with goods and services to sell. Advertising revenues from this ‘real estate’ as well as that from its other properties such as Mail, Maps, and so on, totaled almost USD 150b in 2021; amounting to almost 58% of the company’s revenues. Ad sales on YouTube, also owned by Alphabet, brought in another USD 28b. With the secular shift of the advertising spend to digital channels – over which Alphabet has a tight grip – we estimate the company has a share of around 40% of the digital advertising market and is probably the most valuable advertising property in the world…” (Click here to see the full text)

2. Microsoft Corporation (NASDAQ:MSFT)

Number of Hedge Fund Holders: 269

Microsoft Corporation (NASDAQ:MSFT) is one of the world’s leading cloud providers, offering a wide range of cloud-based products and services. The company’s Azure cloud platform is among the world’s most popular cloud platforms. Microsoft Corporation (NASDAQ:MSFT) continues to invest heavily in its cloud infrastructure. The company has poured hefty investments into its cloud infrastructure and has expanded its cloud services to include services such as artificial intelligence (AI) and machine learning (ML). The company’s track record of driving shareholder value and delivering strong financial performance places it on our list of the best cloud computing stocks to buy now.

On November 29, Morgan Stanley analyst Keith Weiss maintained an Overweight rating and his $307 price target on Microsoft Corporation (NASDAQ:MSFT).

At the close of Q3 2022, 269 hedge funds held stakes in Microsoft Corporation (NASDAQ:MSFT). The total value of these stakes amounted to $61.16 billion, up from $56 billion in the previous quarter with 258 positions. The hedge fund sentiment for the stock is positive. As of September 30, Bill & Melinda Gates Foundation Trust is the largest investor in Microsoft Corporation (NASDAQ:MSFT) and has disclosed a position worth $9.1 billion.

Here is what Alger Capital had to say about Microsoft Corporation (NASDAQ:MSFT) in its third-quarter 2022 investor letter:

“Microsoft Corporation (NASDAQ:MSFT) is a positive dynamic change beneficiary of corporate America’s transformative digitization. Microsoft CEO expects technology spending as a percent of gross domestic product (GDP) to jump from about 5% now to 10% in 10 years and that Microsoft will continue to capture market share within the technology sector.

Microsoft’s shares underperformed during the period because the company slightly missed analysts’ estimates. The miss was due to foreign currency headwinds, weakening small business and consumer demand, and decreasing advertising activity. However, Microsoft showed that despite consumer, advertising, and small and medium business weakness; the company’s main business, the digitization of corporate America, continues to grow. We believe the secular forces of cloud adoption (azure and office 365) remain resilient, and the company’s commercial bookings growth attest to the continued demand for digital transformation.”

1. Amazon.com, Inc. (NASDAQ:AMZN)

Number of Hedge Fund Holders: 269

Amazon.com, Inc. (NASDAQ:AMZN) is a leader in the cloud computing industry. The company’s cloud platform, Amazon Web Services (AWS), is the largest provider of cloud computing services, offering cloud infrastructure, storage, databases, analytics, and more. AWS is used by millions of customers, including consumers, large enterprises, and startups. The cloud business of Amazon.com, Inc. (NASDAQ:AMZN) is one of the key drivers of the company’s success and has become the backbone of many businesses, providing the infrastructure and tools needed to build, deploy, and scale applications. Amazon.com, Inc. (NASDAQ:AMZN) is well-positioned to capitalize on the secular growth trends of the global cloud computing industry.

On November 22, Piper Sandler analyst Thomas Champion updated his price target on Amazon.com, Inc. (NASDAQ:AMZN) to $119 from $125 and maintained an Overweight rating on the shares.

At the end of Q3 2022, Amazon.com, Inc. (NASDAQ:AMZN) was a part of 269 investors’ portfolios that held stakes worth $34.6 billion in the company. This is compared to 252 hedge funds in the previous quarter with stakes worth $30 billion. The hedge fund sentiment for the stock is positive. As of September 30, Fisher Asset Management is the top investor in the company and has a position worth $5.63 billion.

Here is what Alger Capital had to say about Amazon.com, Inc. (NASDAQ:AMZN) in its third-quarter 2022 investor letter:

“Amazon.com, Inc. (NASDAQ:AMZN) is a well-known online retailer and cloud computing leader. The company’s amazon web services business provides utility-scale cloud offerings that facilitate corporate America’s transition to digital systems. Shares outperformed during the quarter as investors were encouraged by strong second-quarter performance despite a challenging macroeconomic environment. Moreover, the company’s retail segment was resilient and avoided discounting inventory like some major retailers did. Revenues for the company’s cloud computing segment, amazon web services (AWS), grew faster than analysts’ estimates during the quarter due to continuing corporate demand for digitization. As a result, management provided better-than-expected forward guidance.”

You can also take a look at 11 Best Digital Payments Stocks To Buy and 10 Best 5% Dividend Stocks To Buy.