5G Stocks To Buy And Watch: Cloud Giants Ready Services


The best 5G stocks will evolve over time. IPhone maker Apple (AAPL) always merits consideration. But the supply chain of Apple stock is a more seasonal and cyclical opportunity.




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Semiconductor stocks offered an early play on 5G wireless, and remain an opportunity. Investors have been cautious on 5G network gear makers and other infrastructure plays, like cell-phone tower operators.

In the long run, 5G wireless services delivered to businesses via cloud computing giants like Amazon.com (AMZN) could offer the best 5G stocks. Many startups are active in “edge computing.” Cloud computing infrastructure is expected to play a big role in deploying 5G services.

Investors should look for updates on company earnings calls as more smartphones, laptops, autos and internet-connected industrial devices use 5G technology. Chipmaker Qualcomm (QCOM) reported fiscal second-quarter earnings that crushed Wall Street targets. Qualcomm makes chips built into 5G phones. It also has been a leader in software platforms to develop 5G apps.

Research firm Omdia forecasts that by 2026, 40% of all mobile subscriptions will be 5G, totaling 4.8 billion. In addition, annual 5G mobile service revenues are expected to reach $540 billion worldwide by 2026, representing 60% of revenues.

5G Stocks: Capital Spending To Jump In 2022

South Korea and China lead in 5G network coverage while Europe lags.

Analysts expect 2022 to be a big year for capital spending by U.S. wireless service providers. Some 5G stocks should get a lift as they ramp up spending on 5G communications network infrastructure.

Led by T-Mobile US (TMUS), wireless firms in the U.S. are deploying 5G wireless services using high-performance, midband radio spectrum. Verizon Communications (VZ) and AT&T (T) are playing catch-up and will spend the most in 2022 and 2023.

Meanwhile, Dish Networks (DISH) turned on its first 5G market, Las Vegas, on May 4. Dish, primarily a pay-TV service provider, played up its 5G strategy at an investor day on May 10.

One big question for wireless firms is whether consumers will pay more for 5G services.

Will Consumers Pay More For 5G Services?

“The wireless industry has historically charged subscribers based on monthly data consumption,” said a Bank of America report. “The introduction of 5G and its rapidly growing coverage footprint may offer operators new ways to differentiate service. In some markets, operators are offering 5G monthly service plans that charge a premium for the fastest 5G speeds or a smaller amount for limited, lower speeds. Charging for speed is akin to how fixed wireline broadband operators sell service plans and opens a new dimension for migrating customers to higher value/priced plans.”

The BofA report added: “The big three U.S. operators offer service plans with extensive 5G coverage but have not differentiated service tiers using download speeds. Plans do differ based on how much data can be downloaded in a month before speeds are throttled. Many plans are differentiated by the amount of streaming, music, or gaming content that is included and by offering discounts for home internet.”

Some telecom firms view fixed 5G broadband to homes as a money maker. 5G broadband to homes could pose a threat to cable TV companies such as Comcast (CMCSA). Cable TV firms currently dominate in high-speed internet services.

Best 5G Stocks: Multi-Year Boom For Chipmakers

Smartphones currently drive most demand for 5G chips. Smartphone chip maker Qorvo (QRVO) on its fourth-quarter earnings call noted that 5G growth in China has reset lower, but some of that has been offset by better rest-of-world demand. Barclays expects India to be the fastest growing market for 5G smartphones from 2022 through 2024.

Aside from Qualcomm and Qorvo, other companies that make chips built into smartphones include Marvell Technologies (MRVL), Skyworks Solutions (SWKS) Cirrus Logic (CRUS) and Analog Devices (ADI).

Naysayers still question the return on 5G investment for telecom companies. They point to the lack of a 5G “killer app” for consumers.

“We do not expect material revenue increases in the global telecom sector from 5G in the 2022 to 2025 period,” credit rating agency Moody’s said in a recent report. “While the revenue picture remains uncertain, 5G still requires significant investment.”

“So far, a true 5G killer app has yet to emerge, which reduces the potential for revenue growth,” added Moody’s. “Indeed, it has become apparent that the most compelling use cases for 5G revolve around businesses rather than residential consumers.”

Enterprise Market Could Be Revenue Driver

A wide range of tech companies are building 5G ecosystems for private networks that deliver business-to-business services. Telecom industry group 5G Americas forecasts that the addressable market to incorporate 5G into private business networks will jump sharply over the next five years, to $16.9 billion in 2025 from $1.9 billion in 2020.

In many industrial settings, 5G infrastructure is expected to displace Wi-Fi-based services.

“While private 5G is still a relatively niche offering, it is fast becoming one of the most competitive segments with equipment vendors like Ericsson (ERIC), telecom operators like Verizon and AT&T, all major cloud providers and even some smaller startups all having live offerings,” said Barclays analyst Kannan Venkateshwar in a report.

He added: “This opportunity has largely grown out of possibilities created by greater virtualization of telecom networks, as well as more flexible network architectures made possible by 5G standards.”

Pundits expect 5G wireless to have a role in manufacturing automation, cloud gaming, autonomous vehicles, drones and remote health care services.

“Enterprise solutions could be the largest 5G revenue drivers, including factory and manufacturing, with telemedicine and health monitoring also new drivers,” Raymond James analyst Ric Prentiss said in a note.

In time, the breadth of 5G stocks will expand. The future of 5G wireless lies in the industrial Internet of Things, remote health care, drones and robotics, autonomous driving, smart cities and more.

5G Wireless: Higher Frequency Airwaves

For some 5G stocks, the long-term opportunity will be tied to new networks that blur the line between mobile and fixed-line infrastructure.

Some chipmakers sell into the 5G network gear market. They include Marvell, Broadcom (AVGO), Intel (INTC), Texas Instruments (TXN) and Analog Devices. Meanwhile, Xilinx (XLNX) makes programmable chips built into prototype network gear.

Initially, 5G networks will utilize higher frequency airwaves in urban areas. As a result, they require more equipment, more cell towers and more fiber-optic wiring than previous generations.

Makers of fiber-optic technologies also are part of the 5G wireless network supply chain. 5G networks will require “small cell” radio antennas, radio access network equipment as well as links to cloud computing infrastructure.

The global 5G radio access market will jump to $21 billion in 2024, up from less than $4 billion in 2019, research firm Omdia forecasts.

Further, 5G also is a long-term opportunity for network gear makers Ericsson, Nokia and Samsung.

Cellphone tower operators American Tower (AMT), Crown Castle (CCI) and SBA Communications (SBAC) also could get a 5G boost, analysts say. Crown Castle will be a 5G infrastructure partner of Dish Network.

5G Networks Require Fiber-Optic Technology

5G networks will connect to fiber-optic networks for “long haul” purposes. That will provide reliability for emerging automotive, robotics and medical applications. Potential 5G stocks to buy include Corning (GLW), Ciena (CIEN) and other fiber-optic players.

Crown Castle makes “small-cell” radio antennas for 5G services in urban areas. The small-cell antennas — hung on utility poles or building rooftops — will require fiber-optic connections to local hubs. Local government approval, though, is required to expand 5G networks.

Rysavy Research projects that there will be 1 million U.S. outdoor small cells by 2028, up 10 times from today’s levels.

5G networks also will improve latency, the lag time it takes networks to respond. That’s crucial for applications such as autonomous driving, remote telemedicine and factory automation. 5G networks reduce latency to a few milliseconds from lags of 50 to several hundred milliseconds.

Keysight Technologies (KEYS) makes 5G network test gear. Keysight competes with Viavi Solutions (VIAV) and others in the 5G test gear market.

How 5G Wireless Will Change Cloud Computing

Edge computing deploys data processing, storage and networking close to sensors and where other data originate, near the “edge” of the network. The goal is to process and analyze data locally in real time rather than send it to faraway data centers in the internet cloud.

“The advent of 5G should mean the rollout of many new technologies we certainly haven’t yet imagined,” economist Ed Yardeni said in a recent report. “To make them possible, the tech gurus are saying that cloud computing will move from a cloud server far away to equipment on the edge of a neighborhood’s network. Edge computing should continue to increase the speed of data transmission, but carriers will have to open their wallets to make it happen.”

Microsoft (MSFT) is selling global network transport and routing services to 5G network operators. Microsoft calls the initiative “Azure for Operators.” Microsoft purchased AT&T’s network cloud business.

Wireless Firms Find Cloud Partners

Amazon Web Services and Alphabet‘s (GOOGL) Google are also selling 5G-related cloud infrastructure services. AWS in December announced plans to sell private 5G network services to enterprise customers.

The AWS “5G in a box” service initially will use shared “CBRS” spectrum. In the long run, Amazon could partner with Dish for a 5G network, analysts speculate.

Verizon has partnered with AWS, Google and Microsoft to develop 5G cloud services.

Edge computing should be a big opportunity for chipmakers Nvidia and Intel, some analysts say. Nvidia and Intel are the biggest providers of data center processors for cloud applications.

Mini data centers in neighborhoods will link to cloud-computing infrastructure. Nokia and Ericsson are developing 5G cloud gateways.

Dell Technologies (DELL), Hewlett Packard Enterprise (HPE), Nokia and others aim to capitalize on edge computing.

Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.

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