My research revealed per the Weather Channel:
These rare cloud formations, called "hole-punch clouds", develop in altocumulus cloud layers and are often the result of airplanes passing through the layer of clouds.
So, how does this happen?
The altocumulus cloud layer is composed of small water droplets that are below freezing called supercooled water droplets. If ice crystals can form in the layer of supercooled droplets, they will grow rapidly and shrink or possibly evaporate the droplets completely.
and National Geographic:
Clouds
are made of water droplets, and hole punch clouds—also known as
fallstreak hole clouds—occur when part of that cloud falls out, leaving
behind a hole. That opening in the cloud is the result of an extremely
localized snowfall.
Usually, atmospheric water droplets latch on to particles in order to
form ice crystals, or snow. This happens on a massive scale during
snowstorms. The only way water droplets can spontaneously form ice
crystals without those particles is if temperatures fall to roughly
-40°F (-40°C). (Learn more about these giant cloud holes.)
In a hole punch cloud, temperatures fall in only a small portion of
the cloud, forming a localized snowstorm. When that snow falls, it
leaves behind a hole. Refraction of sunlight by the ice crystals results
in the rainbow, while the arrangement of those crystals gives us a
bright patch of light in the middle called a sun dog. (See pictures of sun dogs and halos.)
The expansion of air as an airplane passes can also produce hole
punch clouds by cooling water droplets enough for them to form ice
crystals.
