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In the modern interconnected world, seamless communication and transfer of data is an essential need of individuals and organizations alike. Global communications have come a long way over the past few decades and the increased bandwidth and connectivity that 5G technology promises, will allow us to connect even the most remote parts of the world. Reliable access to the internet can boost economies and help improve the quality of life of millions of people, which is why 5G stocks have been garnering so much attention over the past few years. The adoption of 5G technology has increased investor interest in telecommunications and communications infrastructure companies, driving up demand for the stock of major telecom players.
Shares of telecommunications companies are characterized by less volatility than most other sectors of the market, as the demand for communications is usually stable across the board. This adds some clarity for the investing community to distinguish between price movements caused by macroeconomic factors and those caused by the operational performance of issuing companies. The adoption of 5G technology could be a game changer for a number of publicly listed telecom companies, and investors have caught on to the trend.
“We expect 5G to become the worldwide dominating mobile communications standard of the next decade.” – Dr. Christoph Grote
5G stocks are at the forefront of the 5G revolution. These are telecommunications companies with vast established user bases that are racing to adopt the technology as soon as possible. It is estimated that by 2025 there will be 25 billion connected devices across the world. All of this infrastructure and technology requires connectivity, which drives up the demand for the rapid adoption of 5G.
This technology is also incredibly important for the defense industry, as the rapid transmission of information is of critical importance to the defense capabilities of every nation.
Improved connectivity can also help boost the economies of developing nations, as people gain access to more information and ways to improve their lives.
"The network of the future is already being built as we speak. 5G is an important part of that. The speed of technological developments that bring about countless new, smart opportunities enriching our life is unprecedented." - Eben Albertyn
Investing in 5G stocks is the best way for investors to tap into a high-growth industry that is home to major corporations and innovative tech startups alike.
Qualcomm is a major American chip manufacturer that enables the development of 5G technology. The advent of 5G technology has allowed the company to broaden its horizons and tap into the IoT market, as well as industrial equipment and 5G modems.
Qualcomm directly benefits from the increased demand for 5G technology, as it is one of the largest producers of the chips necessary for 5G devices and infrastructure.
In terms of finances, Qualcomm is one of the most stable hardware and technology companies in the world, with net profit margins of over 25%, with the latest quarterly net income figure showing $2.87 billion. This makes Qualcomm an attractive investment for the more risk-averse investors who wish to hold the stock for years to come. Coming off of a challenging 2022, Qualcomm’s YoY stock performance has been nowhere near stellar, with the company shedding roughly 25% of its market value over the course of the year. However, this could also present solid opportunities for new investors to buy up the stock at a lower valuation, or for existing investors to increase their stake and lower their average cost-per-share.
"So one thing that is different is how pervasive AI is, and we have some new technology.. we announce something called microprecision AI. We announced a new way of doing the processing using integral four that you can have 60% improvement in performance per watt" - Cristiano Amon
Overall, Qualcomm is one of the safer bets when it comes to 5G stocks and should be a key consideration for investors that are bullish on 5G technology in the long run.
While not a 5G stock itself, American Tower is one of the most important stocks to look at when considering telecommunications infrastructure. The REIT owns and manages over 221,000 properties that are primarily made up of land, cell towers, and other structures that support the telecommunications infrastructure across the United States. American Tower is one of the largest and best-performing REITs on the market, with the latest quarter showing $840 million in net income. Considering AMT is a REIT, it will be an attractive option for investors who wish to have a stable cash flow from their investments. AMT has a very stable dividend payout history and while the stock price has been quite volatile over the past year, the REIT still has plenty of value to create for shareholders.
"Our customers are multinational, you know network operators, so they're all over the world they're companies like Vodafone, AT&T, etc.
and they are you know in many many countries so the payer is a really solid credit generally for us" - Jim Taiclet
Overall, AMT is one of the best investment options when it comes to 5G-related real estate.
Ciena Corporation is a fiber-optic equipment and design service vendor that works with communications companies. The rapid development of 5G technology has increased the demand for products and services offered by Ciena. Further growth in the market is likely to have an even more positive effect on Ciena’s business - driving up sales, increasing profits, and improving the company’s cash position. All of these developments can lead to Ciena accumulating enough cash to be able to sustain most of its growth through cash investments, rather than debt, which is a welcomed sign for long-term investors.
"Ciena's ultimate purpose is really to enable, you know, simply put, connectivity. We are the best in the world at what we do" - Gary Smith
Broadcom is one of the largest 5G players on the market which develops and maintains circuitry, base stations, and wireless signals, as well as a variety of network infrastructures. Broadcom has been actively investing in new infrastructure and software solutions to accelerate its capability to meet the growing 5G demand.
Along with this Broadcom has made strides in improving its infrastructure management software.
In terms of finances, Broadcom’s bottom line had seen massive growth throughout 2022. The latest quarterly report from October 2022 highlights the amazing operational success of Broadcom:
Such stellar financial performance allows Broadcom to bolster its balance sheet and puts the company in a prime position to take advantage of the coming growth in 5G adoption.
Broadcom’s stock performance has been a mixed bag over the past year. While the company has not lost much value since the start of the year, it dipped roughly 25% lower than its price at the start of the year, before starting to recover in late October 2022.
"..our strategy.. building the leading provider of infrastructure technology globally." - Hock Tan
Corning is a glass and ceramics manufacturer that supplies fiber-optic cables, which are essential for 5G transmission. As 5G continues to grow and new towers are added, the demand for high-speed cable also increases.
Corning is engaged in the manufacturing of small-scale antennas, as well as software for 5G systems.
At first glance, Corning’s financial performance leaves a lot to be desired. Quarterly revenues and net income have dropped off considerably. However, this is attributable more to rising material costs due to inflation, as well as the massive supply chain constraints faced by the market throughout 2022.
In terms of stock performance, Corning has underperformed compared to the start of the year - losing over 10% of its market value since the start of 2022. The stock also experienced some wild swings throughout the 1-year period. However, the long-term adoption of 5G also means more demand for infrastructure, which is exactly what Corning needs to improve its profit margin and deliver better returns in the long run.
"We do deeply scientific and technical work and we do it in a multiplicity of industries" - Wendell P. Weeks
Similarly to American Tower, Crown Castle is a REIT that invests in communications infrastructure, such as cell towers. The company owns and operates over 40,000 cell towers across the United States, as well as tens of thousands of miles of fiber-optic cable. Crown Castle’s portfolio of cell towers and cable directly benefit from the rapid adoption of 5G technology, as the demand for 5G grows, so does the demand for relevant infrastructure.
The REIT has performed admirably throughout 2022 with stable profitability and quarterly revenue increases to boot. However, the stock has endured a tougher time. High inflation and increased interest rates make it harder for Crown Castle to acquire more infrastructure.
The stock has shed roughly 25% since the start of the year. The lower valuation in 2023 could be a welcome sign for new investors to buy up the stock at cheaper prices and hold for the long term.
The latest quarterly report from December showed quarterly revenues totaling $1.76 billion, generating $413 million in net income. Crown Castle maintains an annual dividend yield of 4.79%, making it a solid opportunity for dividend investors.
"[!crown!] a great business, one of the best business models
I've ever seen we and we are so well positioned for where the world is going" - Jay A. Brown
Arista Networks is an internet infrastructure and data center company that could play an essential role in the long-term adoption of 5G technology. 5G can be data-intensive and widespread adoption is guaranteed to drive up the demand for data centers. Arista Networks is in a prime position to take advantage of this growth, as the company is profitable and has a growing bottom line. The latest quarterly report from September showed:
Such explosive growth is a great sign for long-term investors of Arista Networks, as it signals that the company has the capacity to fund its growth without overburdening its balance sheet with debt. This can go a long way in getting investors on board with the stock.
Arista works closely with data centers across the United States providing hardware, network management, and cybersecurity tools to them.
The stock has performed admirably over the past year gaining more than 15%.
Arista Networks is an attractive option for investors looking for a high-growth company that is tied to the growth of 5G technology, while also having other projects in its pipeline.
"I'd share some of my guiding principles and one of the biggest ones is don't just go build an incrementally better product; challenge the status quo, disrupt the market" - Jayshree Ullal
NVIDIA is one of the largest developers and manufacturers of computer hardware, such as graphics processing units (GPUs), which are often used in high-end video games but also have other commercial applications.
Considering 5G can handle higher rates of traffic, NVIDIA’s GPUs are up to the task. GPUs are widely used by telecom companies around the world and increased adoption of 5G is likely to increase the demand for high-end GPUs and other components as well, which can be a considerable boost for NVIDIA’s bottom line.
2022 has been a very difficult year for semiconductor stocks. Rising inflation and material costs have hampered the YoY financial performance of most GPU manufacturers, and NVIDIA was certainly no exception. The Q3 report from 2022 showed a 72.4% drop in net income, with the net profit margin declining by 67%.
This underperformance was caused by severe macroeconomic headwinds present in the markets throughout 2022. However, the stock has managed to mark a comeback from the lows of October 2022 - reclaiming the price point seen at the start of 2022.
"Nvidia 25 years ago was one of the most exciting PC graphics chip companies, now over the years we reinvent ourselves so now we're really a GPU computing company and we can use our GPUs for all kinds of problems and in fact over the years we've also evolved a company to become a systems company" - Jensen Huang
5G stocks can be great long-term investments, as the adoption of 5G technology is accelerating globally, which means increased demand for the products and services provided by various 5G-related stocks.
While it is not possible to say for certain, 5G stocks could be at the forefront of a prospective market turnaround in 2023. Conversely, a downturn would send share prices lower, presenting better buying opportunities in the short term.
REITs that are directly correlated with 5G technology seem to be the most attractive options for investors right now. REITs, such as American Tower and Crown Castle, provide essential infrastructure for 5G transmission.