The purchase price ranks among the most expensive technology deals in history and is the highest IBM has ever paid for a company.

Red Hat is the biggest distributor of the Linux operating system, an open-source platform developed by Linus Torvalds in the 1990s.

What’s open source?

Open source platforms allow software developers to make their own additions to code and use it for their own projects, free of charge. That’s in contrast to platforms like the Apple OS and Microsoft Windows, which are developed primarily by the companies, available by license only, and generally not open to outside developers.

Linux is perhaps the best-known open-source platform and is the basis for the Android operating system, among others. Other open-source platforms include Drupal, Mozilla, and WordPress.

Shifting to the cloud

Other large tech companies have recently bought open-source companies, in a bid to stay relevant as more operations shift to the cloud, according to experts.

In June 2018, Microsoft announced it will buy software sharing company Github for $7.5 billion. In March 2018, Salesforce announced a $6.5 billion purchase of MuleSoft,  which allows companies to combine a variety of software platforms through the cloud.

What’s the cloud?

The cloud is a distributed network for computers that allows companies and consumers to store their data and conduct other operations remotely.

Amazon, Google, and Microsoft, which operate large data network centers, are three of the largest cloud services providers.

IBM, which offers both computer hardware and software, is trying to position itself as something of a hybrid, that will let companies develop their own clouds without relying on a large data center from one of the Internet giants, according to reports.

Investing in cloud technology

You can invest in companies that are leading the way in cloud computing. Check out the ETFs and selected single stocks on Stash.

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These days, Wu-Tang Clan could alter the lyrics to say the “cloud rules everything around me,” and probably make just as much sense.

What is the cloud?

The cloud lets you save your homework without a USB thumb drive, to binge-watch “Ozark” on Netflix, and even allows President Trump to fire off his famous early morning tweets.

But what is it? Despite calling it the cloud, it’s not actually a wall of cumulus clouds in the sky.

Cloud computing is a method of storing, accessing, and syncing data and software through the internet, rather than on the hard drive of a local computer. So, the “cloud” refers to a global network of computers, or servers, that store information, and that we access remotely from devices such as laptops, desktop computers, and smartphones.

For example, if you want to watch a movie on-demand through Netflix, you’re using the cloud to access it—the movie isn’t stored in or on your TV or laptop. You have to request it from Netflix’s servers to watch it. Similarly, every time you log in to a free email service such as Google or Yahoo, you’re accessing it in the cloud.

How the cloud is used

With cloud services becoming more universal, increasing numbers of businesses and industries are jumping on board. Companies that previously lacked IT resources can now purchase them affordably, and can even test and market new products and services without hiring armies of software developers and engineers, or by purchasing huge numbers of new servers themselves.

They can do this either through the public or private cloud. The public cloud is network space any business or individual can use from a cloud provider. A private cloud is a dedicated space that companies can purchase from providers, for their own exclusive use.

In addition to using the cloud to stream on-demand TV and movies, we use it to log into our social media networks, and see what’s happening with our friends and families. Many people also use it for work, by creating, saving, and sharing documents through Google Docs, for example, or storing a customer’s information in a Salesforce database.

The cloud is at work all around us, and in ways most people never actually see. Cloud computing has allowed us to become untethered, thanks to ubiquitous wireless internet networks, small devices like smartphones and tablets, and a smattering of digital products and services.

The cloud computing industry is typically broken down into sub-industries, including:

• Infrastructure-as-a-service (IaaS), which is the hosting of server networks (example: Amazon Web Services)
• Software-as-a-service (SaaS), offering software over the web (example: Salesforce)
• Platform-as-a-service (PaaS), creating a platform available over the web (example: Facebook)

All of these services are expected to continue growing in coming years, and become increasingly profitable for the companies working in the industry, according to industry data:

We can now work, shop, order meals, send messages to our friends, schedule a yoga class, and listen to music on Spotify, and even play video games all because of the cloud.

Cloud computing’s biggest players

The idea of cloud computing may seem new, but it’s actually been around for some time. In the 1950s, computer scientists first developed the technology, which predated the modern internet.

The cloud didn’t develop into a commercial enterprise until the early 2000s when cloud computing company Salesforce became the first major cloud-based company, and also the first to market it as an advantage.

Other companies followed suit, and today, many products and services that we use every day are available only through the internet.

Some of the biggest and most important companies in the cloud computing industry include:

• Amazon (Amazon Web Services)
• Microsoft (Azure)
• Google (Google Cloud Platform)
• Oracle
• SAP
• IBM

And in terms of cloud infrastructure services—that is, the companies that actually host the servers that store information that we all request from our devices—just five companies including Amazon and Microsoft have cornered the market, according to industry data.

And as the cloud becomes bigger and consumers rely on it more, the potential profits for cloud computing companies continues to grow, too.

Companies providing cloud infrastructure services like Amazon and IBM make money by selling server space and computing power to other companies that use it to provide a product or service, such as Netflix, cloud storage company Dropbox, or social media networks Twitter and Facebook.

Cloudy, with a chance of…

The future of the cloud computing industry actually seems pretty sunny.

In 2018, the worldwide public cloud services market is expected to grow more than 21% from 2017 to become a roughly $186 billion market, according to the business consultancy Gartner. And by 2020, the market for cloud services could increase to $411 billion.

But while cloud computing seems set for growth, for those looking to invest in the industry, there are still reasons for caution.

Security is one factor. As the volume of personal details about consumers continues to flood online, the industry has experienced multiple large-scale data breaches over the past few years. One of the most infamous was the 2014 iCloud hacking scandal, in which numerous celebrities’ Apple accounts were accessed and their personal photos were stolen and leaked.

Consumer confidence is another potential hurdle. For example, more than two-thirds of U.S. consumers are afraid companies aren’t doing enough to protect their personal data in the cloud, according to survey data.

And there’s also the possibility that governments could introduce new regulatory standards, particularly when it comes to companies using the cloud to conduct financial services, which could create roadblocks for the industry.

Despite these issues, the future of the industry seems anything but cloudy.

You can invest in companies working with and in the cloud computing industry on Stash.

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What is Watson?

The cognitive computing platform, which can read and understand natural language queries and can sort through gigantic sets of data to arrive at relevant answers, has found uses in numerous settings.

Named after Charles J. Watson, one of IBM’s founders, Watson started out as a project involving 25 computer science researchers, starting in 2007. Their goal was to create a machine that could comprehend both the meaning and context of human language.  Today Watson uses the equivalent of 90 servers, capable of holding roughly 1 million books’ worth of data, according to IBM.

Where is Watson?

Healthcare: Watson has been used to help doctors choose the right treatments for cancer patients at Memorial Sloan Kettering in New York, and in cancer research at M.D. Anderson Cancer Center, part of the University of Texas. The latter shelved its use of Watson after it delivered less than optimal results assisting in cancer research in 2013, at the cost of $62 million.

Nevertheless, researchers expressed amazement at Watson’s ability to process and synthesize reams of data from patient histories.

The Mayo Clinic is also using Watson to more accurately match patients to clinical trials.

Call Centers: IBM has rolled out an Ask Watson feature, in testing now, that reportedly lets customers ask open-ended questions, such as how much data they have left on their phone bills, how to diversify a retirement plan or flights between different cities for which mileage points can be used.

U.S. software company Autodesk currently uses Watson for customer support, reportedly compressing the time it took process requests to minutes, from days. Australian bank ANZ has used Watson in call centers since 2013, in its private bank.

Your dinner: Watson has even turned chef, capable of sorting through 10,000 recipes to come up with new creations for dinner–not all of them tasty, according to some reports.

Watson even has its own cookbook, though don’t expect help cleaning up the dishes afterward.

Stock-picking: At least one investment company, called EquBot, uses Watson to pick stocks that it thinks are most likely to increase in value over the next 12 months, based on economic conditions, trends and world events, according to the fund managers.

EquBot says it mines millions of pieces of data from regulatory filings, quarterly results, news articles, even social media pots.

Watson’s got competition

IBM is far from alone in its aspirations to develop thinking, problem-solving computers. Google has an entire division devoted to artificial intelligence, called Google AI. Facebook has a branch called Facebook Reality Lab, focused on virtual reality and other products. Similarly, Microsoft has an AI research division. Customer relationship management software company Salesforce even has its own version of Watson, which it calls Einstein.

Watson may be just the beginning of a revolution in computing that connects humans and machines.

Want to learn more about investing in the world of machine learning technology? Check out these investments and single stocks on Stash.

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