5G stocks to watch: Investing in the network of the future
By Matt Neill
Edited by Jekaterina Drozdovica
15:47, 11 November 2021
The introduction of 5G marks the next leap forward in global telecommunications. It has widespread implications for the economy, and companies that operate in the sector and beyond.
As the world becomes more interconnected and reliant on data, this new and improved means of transmitting information across networks could well become a more critical part of the economic infrastructure, giving a boost to 5G industry stocks.
Countries around the world have already deemed the development of 5G networks to be of strategic importance, as evidenced by spats over the role of Chinese telecoms company Huawei in helping build infrastructure in countries such as the US.
It will impact everything from how gamers are able to stream high-quality content on their mobile devices on the go, to how multinational companies manage their data and security, to the development of the internet of things (IoT).
In a recent report on the market, Swedish telecommunications company Ericsson predicted that companies would need to get involved in the sector sooner rather than later if they were to grab a slice of the enormous growth potential on offer:
“Industry digitalization opens new opportunities for service providers to build and extend their businesses beyond connectivity,” the report said.
“The probability to be successful in capturing parts of this potential is higher in the next 5-7 years, when roles and market shares are established rather than later.
“Addressing these opportunities could enable service providers to unlock additional revenue streams of up to 35%, on top of the current scope of business by 2030.”
But what are the potential rewards and risks of investing in 5G technology, and which are the 5G shares to watch?
5G benefits and opportunities
As a significant step forward in transmission speed and the potential to dramatically lower latency and increase network capacity, 5G provides a host of benefits to consumers and businesses alike.
The increased bandwidth of 5G will allow users to stream data at a much faster rate, offering business potential across the board as more consumers are able to access more information at a higher rate.
The need to transition the industry’s underlying infrastructure over to networks capable of handling 5G marks a significant opportunity for investors.
Mordor Intelligence estimates that the 5G infrastructure market was valued at around $3.5bn in 2020, with a projected compound annual growth rate of 53% through to 2026, giving it a potential value of over $53.8bn.
Alongside consumer applications, 5G’s potential for enterprise is huge, with automation and integrated AI networks being just some of the ways in which businesses will be able to harness the faster processing speed on offer.
Samik Chatterjee, Telecom & Network Equipment / IT Hardware Senior Analyst at JP Morgan, says that from an investment perspective, enterprise use is the largest opportunity for 5G to make a difference, and companies have still yet to realise its full potential.
“Another is fixed wireless, which could boost connectivity through private 5G networks deployed across organizations, regions or campuses.”
Risks ahead for 5G
As with any emerging technology, 5G is not without significant risks.
For companies, the transition to 5G infrastructure is one that requires huge upfront capital investment with a longer term pay-off period. In the race to secure access to the market there will be significant costs in the short-term.
Many emerging technologies likely to benefit the most from 5G, such as augmented and virtual reality, or autonomous vehicles, are still years away from becoming a part of the mainstream economy.
And while consumers can see the immediate benefits of faster download speeds and higher bandwidth in the palm of their hands, translating 5G into an enterprise context where the rewards are potentially much greater is a lot more challenging.
Ericsson noted that industry adoption of 5G use cases was likely to come some time after it becomes normal for consumers.
“As with any major technology shift, the ICT industry at large has come to learn more over time. In summary, there is a higher earlier potential and focus in consumer market (B2C) 5G services than previously projected, along with a confirmed but later adoption of industry (B2B) use cases,” the company said.
“The reasons for this adjustment over time are found in widely adopted scope adjustments, and in more evolved perspectives on technical competence levels, organizational barriers and the inertia and regulations surrounding replacement cycles of legacy systems.
Biggest 5G stocks by market capitalisation
The development of 5G is set to impact sectors ranging from wireless providers to semiconductor manufacturers, telecommunications companies and more.
While choosing 5G stocks to invest in, investors may follow various strategies, for example, investing in the biggest industry names.
Below is a list of 5G stocks which are set to be part of the fifth-generation technology revolution. The companies listed are the biggest by market capitalisation, according to comparative research by capital.com.
Nvidia is an industry-leading manufacturer of graphics processing units for enterprise. It’s a name familiar to both gaming enthusiasts and crypto miners, with the company’s products popularly used in bitcoin mining.
The company’s Nvidia Aerial product is aimed at integrating hardware with 5G networks across the virtual radio access network environment. It recently announced an agreement with Google to establish the first AI-on-5G Innovation Lab.
Broadcom is a California-based manufacturer of semiconductors as well as provider of a suite of related software products. It was founded back in the 1960s as the semiconductor manufacturing arm of Hewlett Packard.
The company has made 5G a priority for future investment, and demand for chips to power devices capable of transmitting on the networks is forecast to remain strong. Broadcom counts iPhone maker Apple (AAPL) as one of the largest customers in its wireless chip division.
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Wireless network operator Verizon is the largest carrier in the United States with over 121.2m subscribers. 5G stands to benefit the company by allowing users to access more data more quickly, improving user engagement with the company’s services.
Verizon began rolling out 5G services to major US cities back in 2018, and by the end of this year will have coverage across most of the country.
Intel is one of the world’s largest semiconductor chip manufacturers. The company is known as the supplier to a host of personal computer brands, including HP, Lenovo and Dell.
Intel has targeted its 5G efforts on providing chips for wireless network infrastructure. It recently announced new 5G-capable processors for use in Windows laptops.
San Diego-headquartered Qualcomm is one of the biggest names in the semiconductor industry, with a presence across wireless technology.
The company is investing heavily in 5G products and chipsets. It owns multiple patents on products such as the Qualcomm Snapdragon X65 modem, which will help facilitate the development of the network.
Are 5g stocks a good investment?
5G stocks offer a potentially good investment opportunity as the market moves to faster networks over the coming decade. Yet as with all investments, 5G stocks pose risks which investors should be aware of.
What is the biggest 5G company?
Some of the biggest 5G companies by market capitalisation include NVIDIA, Broadcom, Verizon, Intel and Qualcomm.