Don't Ignore This Glaring Problem in Cloud Computing Stocks

Growth-oriented investors in the tech sector love cloud computing companies. The market is expanding as more companies migrate their infrastructure onto cloud platforms, replace their on-premise software with cloud-based services, and expand their cloud infrastructure to support the surging usage of cloud-based storage, streaming media, and apps.

Cloud stocks are also well-insulated from macro headwinds like the trade war and COVID-19. In fact, the ongoing pandemic is actually generating tailwinds for some cloud computing companies as more people stay at home and access cloud-based services.

That's why the Global X Cloud Computing ETF (NASDAQ: CLOU), which owns some of the market's top cloud stocks, rallied about 60% this year as the Nasdaq rose less than 30%. That's an impressive return, but investors shouldn't ignore one glaring problem with many high-growth cloud stocks: a lack of stable profits.

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Source Fool.com