What is data sovereignty and why does it matter for investing?

Data sovereignty refers to the concept that digital information is subject to the laws of the country where it's stored. For investing, it matters because governments worldwide are increasingly requiring sensitive data to stay within their borders for security and privacy reasons. This creates specialized markets for cloud providers who can guarantee data remains in specific countries, potentially leading to growth opportunities as regulations tighten.

What is a sovereign cloud?

A sovereign cloud is a cloud computing environment that keeps all data storage and processing within the legal and physical boundaries of a specific nation. Unlike global cloud platforms, sovereign clouds ensure that data never leaves the country, complying with local regulations about data residency, privacy, and security. They're especially important for handling sensitive government data, healthcare information, and financial records.

How does data nationalism affect these companies?

Data nationalism—the trend of countries requiring data to be stored locally—creates protected markets for these companies. As governments implement stricter regulations about where their citizens' data can be stored, these specialized providers gain an advantage over global players who might not have local infrastructure. This regulatory protection can lead to higher profit margins and less competition in their specific regions.

Why can't larger cloud providers like AWS or Azure simply enter these markets?

While major cloud providers are expanding globally, they face unique challenges with sovereign clouds. They must build country-specific infrastructure, navigate complex local regulations, and sometimes partner with local entities. In many cases, governments specifically want alternatives to these dominant U.S. providers—creating openings for truly local specialists who better understand regional compliance needs and can offer solutions tailored to specific national requirements.

12 handpicked stocks

Sovereign-Cloud Specialists

These carefully selected stocks represent companies that keep sensitive digital data within national borders. As governments worldwide tighten regulations on data security, these specialized cloud providers are positioned to thrive in an increasingly data-nationalist world.

Han Tan | Market Analyst

Updated 2 days ago | Published at juin 17