WCLD Down 30% as Growth Investors Finally Get Cold Feet About AI Spend

Cloud computing stocks are trading like they’ve hit a wall. WisdomTree Cloud Computing Fund (NASDAQ:WCLD) dropped 30.5% over the past year to $28.60, a stark reversal from the sector’s pandemic-era dominance. This divergence from the S&P 500 (NYSEARCA:SPY)’s 14.4% gain reflects investor skepticism about whether emerging cloud software companies can maintain their business models as AI reshapes the technology landscape.

Growing concerns about AI disruption have weighed on software stocks, with investors questioning whether companies like HubSpot, Atlassian, and others in WCLD’s portfolio can maintain their competitive positions. The fund’s structure reflects this concentration risk, holding 65 positions almost entirely in Information Technology at 92.1%. This heavy sector tilt amplifies both the opportunities and risks from AI-driven transformation.

What WCLD Actually Delivers

This ETF provides exposure to emerging cloud computing companies through the BVP Nasdaq Emerging Cloud Index. The portfolio spreads risk across 65 positions, with MongoDB (NASDAQ:MDB) as its largest holding at just 2.81% – meaning no single company dominates performance. The fund charges a 0.45% expense ratio, which is reasonable for accessing this specialized segment of the cloud computing market.

The return engine is straightforward: growth in recurring subscription revenue from companies selling cloud-based software and infrastructure. These businesses typically show strong customer retention and expanding margins as they scale. WCLD focuses on emerging players rather than infrastructure giants like Amazon and Microsoft that are capturing most AI spending.

The Contrarian Case and Its Limits

Some institutional investors see opportunity in the wreckage. Bank of America and Tower Research increased positions in early January 2026 despite negative sentiment. The thesis: software companies are rapidly integrating AI into their products, and the current sell-off represents a valuation reset rather than structural collapse.

But there’s a timing problem. WCLD’s holdings are growth-stage companies, many still unprofitable. MongoDB, the largest holding, trades at 67x forward earnings despite negative EBITDA. These valuations worked when rates were zero. They’re harder to justify now, especially when AI disruption remains an open question.

WCLD fits portfolios seeking aggressive growth exposure to cloud software, but only for investors comfortable with significant volatility and a multi-year horizon. The fund’s concentrated tech exposure and focus on emerging companies means it will amplify both gains and losses. If you’re looking for stable tech exposure, the Nasdaq 100 (NASDAQ:QQQ) offers broader diversification with 15.5% one-year returns. WCLD is a bet that today’s emerging cloud companies will dominate tomorrow’s AI-enhanced software landscape. That may prove correct, but the path will likely remain turbulent.