After a failed attempt last year, Google’s parent company, Alphabet GOOGL, is set to acquire cloud cybersecurity startup Wiz for $32 billion in an all-cash deal. If successful, this would mark Alphabet’s largest acquisition ever, signaling its aggressive push into the cloud cybersecurity space.

The move will not only influence the GOOGL stock but also have a broader impact on the stock market and ETFs exposed to cloud computing, cybersecurity, and mega-cap tech stocks. Investors looking to capitalize on this trend may want to tap the opportunity with these ETFs — Fidelity MSCI Communication Services Index ETF FCOM, Vanguard Communication Services ETF VOX, Global X Cloud Computing ETF CLOU, Amplify Cybersecurity ETF HACK and First Trust NASDAQ Cybersecurity ETF CIBR.

Why is Alphabet Eyeing Wiz?

Wiz, founded in 2020, has quickly emerged as a major player in cloud security by offering streamlined solutions that help businesses identify vulnerabilities across cloud environments. .

The acquisition is expected to significantly strengthen Google Cloud’s competitive edge against Amazon’s AMZN Web Services and Microsoft’s MSFT Azure, both of which have invested heavily in security capabilities. Though the internet search company’s cloud business has been profitable in recent quarters after years of losing money, its sales growth has slowed.

The cybersecurity sector has gained significant attention amid increasing cyber threats and data breaches, especially following last year’s global CrowdStrike CRWD outage. Acquiring Wiz will allow Alphabet to scale its cloud platform's security layer and attract large enterprise clients who prioritize safety and compliance. The acquisition is pending regulatory and other approvals. 

The acquisition follows earlier negotiations between Google and Wiz, which collapsed last year due to antitrust concerns. At that time, Wiz turned down a $23-billion offer, citing potential regulatory obstacles, and chose to pursue an initial public offering. However, with a new administration in Washington, the regulatory environment is expected to have become more favorable for Google, helping clear the path for the blockbuster deal.

ETFs in Focus

Let us delve into each ETF below:

Fidelity MSCI Communication Services Index ETF (FCOM) 

Fidelity MSCI Communication Services Index ETF follows the MSCI USA IMI Communication Services 25/50 Index. It holds 109 stocks in its basket, with Alphabet Class A and Class C shares occupying the second and third positions at 20.7%. Fidelity MSCI Communication Services Index ETF has amassed $1.4 billion in its asset base and trades in an average daily volume of 158,000 shares. It charges 8 bps in annual fees and has a Zacks ETF Rank #3 (Hold), with a Medium risk outlook (read: 5 ETFs to Ride META's Record-Winning Rally).

Vanguard Communication Services ETF (VOX)

Vanguard Communication Services ETF also targets the communication sector by tracking the MSCI US Investable Market Communication Services 25/50 Index. The fund holds 117 stocks in its basket, with Alphabet Class A and Class C shares taking the second and third spots with a 21.7% share. Vanguard Communication Services ETF has an AUM of $4.3 billion and trades in a good volume of 237,000 shares a day, on average. It charges 9 bps in annual fees and has a Zacks ETF Rank #3, with a Medium risk outlook.

Global X Cloud Computing ETF (CLOU)

Global X Cloud Computing ETF seeks to invest in companies positioned to benefit from the increased adoption of cloud computing technology, including companies whose principal business is offering computing Software-as-a-Service, Platform-as-a-Service, Infrastructure-as-a-Service, managed server storage space and data center real estate investment trusts, and/or cloud and edge computing infrastructure and hardware. It tracks the Indxx Global Cloud Computing Index and holds 37 stocks in its basket. 

The Google-Wiz acquisition can positively impact cloud ecosystems and their suppliers, benefitting companies in this ETF. Global X Cloud Computing ETF has an AUM of $310.7 million and trades in an average daily volume of 225,000 shares. The ETF charges 68 bps in annual fees and has a Zacks ETF Rank #2.

Amplify Cybersecurity ETF (HACK)

Amplify Cybersecurity ETF is the first cybersecurity ETF that invests in companies within the growing cybersecurity industry, providing cybersecurity solutions that include hardware, software and services. It tracks the Nasdaq ISE Cyber Security Select Index, holding 25 securities in its basket. While Alphabet itself is not a core holding, HACK’s holdings could gain on increased deal activity and heightened investor attention on the cloud security space post-acquisition (read: Advent of ChatGPT: Boon/Bane to Cybersecurity ETFs?).

Amplify Cybersecurity ETF has amassed $1.9 billion in its asset base and charges 60 bps in fees per year. It trades in an average daily volume of 162,000 shares. 

First Trust NASDAQ Cybersecurity ETF (CIBR)

First Trust Nasdaq Cybersecurity ETF follows the Nasdaq CTA Cybersecurity Index, which measures the performance of companies engaged in the cybersecurity segment of the technology and industrial sectors. The index includes companies primarily involved in the building, implementation and management of security protocols applied to private and public networks, computers and mobile devices to provide protection for the integrity of data and network operations. First Trust Nasdaq Cybersecurity ETF holds 32 stocks in its basket. The acquisition may drive valuations higher across the sector and trigger further M&A speculation, boosting the ETF's constituents.

CIBR has accumulated $7.7 billion in its asset base and charges 59 bps in annual fees. It trades in an average daily volume of 854,000 shares.

 

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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report

Microsoft Corporation (MSFT) : Free Stock Analysis Report

Alphabet Inc. (GOOGL) : Free Stock Analysis Report

Amplify Cybersecurity ETF (HACK): ETF Research Reports

Vanguard Communication Services ETF (VOX): ETF Research Reports

Fidelity MSCI Communication Services Index ETF (FCOM): ETF Research Reports

First Trust NASDAQ Cybersecurity ETF (CIBR): ETF Research Reports

Global X Cloud Computing ETF (CLOU): ETF Research Reports

CrowdStrike (CRWD) : Free Stock Analysis Report

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