America’s need for 5G speed has sparked a wildfire in Wall Street speculation about the investment potential of next-gen internet applications. Stocks touted as the go-to options for the discerning investor have ranged from Apple (NASDAQ: AAPL) with the highly anticipated arrival of their 5G-enabled phone rolling out in 2020 to semiconductor companies like Qualcomm (NASDAQ: QCOM) who have been busy building the tech needed for the network of the future
5G stands for the fifth generation of cellular wireless and represents much more than quicker data delivery. According to PC Magazine, the new technology will enable “greater speed (to move more data), lower latency (to be more responsive), and the ability to connect a lot more devices at once (for sensors and smart devices).”
For retail users, this might mean smoother, sleeker video game experiences and lightning-fast streaming services. The applications for the commercial and industrial sectors are more impressive. China has been experimenting with using 5G tech to manage cement production, monitor typhoons, and use robots to perform surgeries remotely.
While the tech has exciting potential, some analysts are cautioning against jumping on just any 5G bandwagon. All four major US mobile phone carriers have launched some version of 5G service – there are limited rollouts in select cities, but coverage is sparse. It's an investment that will require a buy-and-hold strategy for those looking to capitalize on the full 5G potential. Goldman Sachs, for example, is cautious about consumer demand for faster phones.
“US wireless carriers are accelerating the pace of their 5G deployments and expect to have mostly national coverage by mid-2020, as 5G enabled handsets become more widely available,” Goldman Sachs analyst Bred Feldman wrote in a reported quoted by Investor Business Daily. “While the timelines for 5G deployments are becoming increasingly clear, the use cases for the consumer remain conceptual.”
Another consideration is that updating equipment and infrastructure to 5G standards is an expensive endeavor for companies. Nokia (NYSE: NOK), a network equipment provider, recently reduced its profit forecast due to additional investment outlay required to keep pace in a highly competitive 5G market. Stocks tumbled 23 percent after the announcement, and some analysts are predicting it’s early days and to expect some rough road. Network tech companies like Nokia and Ericcson (NASDAQ: ERIC) won't likely be strong out the gate but will make up in gains as 5G becomes more prevalent (2021-2023). It is a better choice for those with a short-to-medium term horizon.
On the other hand, there is good potential for companies that make the hardware for 5G enabled devices. The San Diego-based company is a digital and wireless manufacturer uniquely positioned to take full advantage of the 5G wave. They are actively involved in the development of new network standards and are responsible for several of the tech innovations that will make greater connectivity possible. With a market cap north of $100 billion and a big deal to provide chips for Apple's 5G phones coming out in 2020 – it's a more secure option for those looking for a piece of the 5G pie.
Sources:
https://www.pcmag.com/article/345387/what-is-5g
https://www.washingtonpost.com/world/asia_pacific/showing-that-the-us-wont-hold-it-back-china-launches-commercial-5g-service/2019/10/31/4f2e64da-fb16-11e9-9e02-1d45cb3dfa8f_story.html?outputType=amp
https://finance.yahoo.com/news/5g-wireless-revolution-overhyped-210624125.html
https://www.investopedia.com/articles/investing-strategy/062916/5g-network-3-companies-invest-2020-qcom-nok.asp
https://www.investors.com/news/technology/5g-stocks-5g-wireless-stocks/
Disclaimer: Lindsey Boycott is an experienced financial consultant who writes for Finscreener.com. The observations she makes are her own and are not intended as investment or trading advice.
Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.org. The observations he makes are his own and are not intended as investment or trading advice.
