5G Stocks Continue to Rise
I’m not going to lie to you: we are entering one of the largest, perhaps longest periods of economic uncertainty. Volatility is going to be sky-high. Having said that, certain stocks are proving to be better at taking the hit than others.
One industry, notably, hasn’t only weathered the storm, it’s actually come out the other side arguably stronger. In other words, 5G stocks are looking great, so investors sleep on them at their own peril.
First, we have to understand what it is that makes 5G stocks nearly coronavirus-proof. And in order to understand that, we have to start with what makes them so enticing in the first place.
5G companies are both iterative and innovative. Those are usually contradictory terms, but in this case, they both apply.
5G involves both a service we’re familiar with (mobile wireless Internet) and something we’ve never seen before (speeds that make other Internet services seem like a “Model T” car attempting to race an “F-35” jet).
We’re talking speeds that may be as high as 100 times faster than our current LTE/4G networks, while delivering latency of just a few milliseconds. On top of all that, 5G will be able to connect to many more devices per cell site. In other words, it’s arguably one of the most substantial advancements in the mobile Internet since its inception.
And the best part is that it is still very much an emergent industry.
While giants like Verizon Communications Inc (NYSE:VZ) aren’t likely to see exponential stock gains in a few months time, companies that specialize in 5G are chock-full of potential.
One study by the GSMA, an organization that represents mobile operators, claims that 79 operators across 39 markets announced plans to launch commercial 5G services as of January 2020. As you’d expect, the technology will land in urban areas first and gradually expand in the coming years. (Source: “5G Is Now Live in 24 markets, GSMA Predicts It’ll Be 20% of Global Connections by 2025 — and Eyes a Big Tech Break-Up,” TechCrunch, March 5, 2020.)
The GSMA’s study projects that 4G will remain dominant likely until 2023, which is when we’ll start to see more people switch over to 5G.
One hurdle is that the price differential may scare away investors for some time.
“The number of live 5G markets is increasing by the day and consumers’ awareness of the technology is also growing as hype makes way for reality. However, there is wide variation across the globe in terms of intentions to upgrade to 5G and the willingness to pay more for it,” says the GSMA report. (Source: Ibid.)
But, as is always the case with technology, prices will eventually fall and availability will rise, leading to a higher adoption rate.
So with 5G stocks, you’re investing in a growth market that is expected to see significant market-share gains for a half-decade at least (likely longer), should no other technology displace it within that time (an unlikely outcome, but you never know).
But there’s more to 5G stocks than just the consumer numbers. One amazing thing about this technology is that, by virtue of its speed, it isn’t only limited to growth via everyday mobile phone users.
Allow me to explain. One of the key factors of 5G is that it will radically alter the future development of artificial intelligence (AI) and Internet of Things (IoT) technologies, respectively.
The speed will allow machine learning and communications to rapidly progress to the point that it may very well facilitate AI breakthroughs or faster integration of IoT technology (a subject I’ve been covering on and off literally my entire career).
Both IoT and AI have billions, if not trillions, of dollars in market potential. In other words, 5G could be among the most important factors helping AI stocks and IoT stocks skyrocket, not only allowing investors to see huge gains via 5G stocks, but also via AI or IoT stocks.
So 5G stocks, alongside AI stocks and IoT stocks, allow investors to potentially see significant gains across multiple tech industries that are all ready to break out and develop huge market value in the next few years.
Chart courtesy of StockCharts.com
The above chart shows that two of my top 5G stocks—Qualcomm, Inc (NASDAQ:QCOM) and Skyworks Solutions Inc (NASDAQ:SWKS)—have both recovered nicely from the economic downturn and are set to rise.
Both are only up a few modest percentage points year-to-date, but that’s understandable, given the unforeseen market volatility named COVID-19.
Having said that, SWKS stock and QCOM stock have some huge upside in the coming years. A lot of that has to do with the market forecast I’ve outlined above. After all, when it comes to IoT and AI, it’s not a matter of if, it’s a matter of when. So I anticipate massive gains across the board for these strong tech stocks.
But to go even further into why 5G stocks are so great right now, not only despite the coronavirus, but maybe even because of it, we have to understand the opportunities and possibilities that the current environment has presented us.
What Makes 5G Stocks Coronavirus-proof
There are two main factors that render 5G stocks coronavirus-proof.
The first is the obvious one: there are long-term trends in tech that often take years, sometimes even the better part of a decade, to fully implement.
As such, long after COVID-19 becomes just a memory (that is, unless this really is the apocalypse, in which case stock performance is the least of your problems), you’ll still be hearing about 5G technology and seeing it continue to gain traction around the globe.
So when dealing with 5G stocks (and the broader tech market in general), you can always bet that the long-term trends will outlast current market tribulations. That’s been true of almost every major tech stock in the 21st century and I don’t imagine that this rule will stop holding true now.
But the real opportunity here, and why 5G companies aren’t potentially just coronavirus-proof, but actually perfectly suited to profit from the virus, is the need for Internet connectivity during the transition to working from home.
I have friends in industries ranging from graphic design, to coding, to corporate law, who have all begun working from home, as is the current guideline in many countries. Now, this may just be a temporary change, but there is a widespread effort to adopt work-from-home models as a means to prevent—or at least mitigate—another viral outbreak.
Now, I don’t pretend to know if that’ll stick; people are stubborn creatures, quick to forget and slow to change. But the COVID-19 pandemic has been a truly world-altering calamity, the likes of which have not been experienced for a lifetime at least, meaning that we very well could see a retooling of the way we work.
In that case, Internet speed and connectivity will be more important than ever. If you work in an environment where, say, you have to transfer huge amounts of data in a quick and efficient manner, doing so with hard drives or other tools would dramatically speed up the process, versus uploading it all and then having the recipient download it.
But if we switch to a work-from-home model across the board, companies that need to ensure efficient and speedy transfers of data will have no choice but to adopt the latest in mobile Internet technology.
And that’s where 5G stocks come in.
If we end up seeing this great work migration away from the office and toward the home, then many people will, out of necessity or convenience, opt for the speed afforded them by 5G technology.
In that case, we could see an explosion of early adoption rates that far outpace the current projections. And, as you well know, outpacing projections is one surefire way to dramatically increase a company’s valuation.
In other words, there is huge potential with 5G stocks, not just in the future, but also in the now.
Tech stocks are almost always about investing in the future, but sometimes, the future comes to you.
What do I mean by that?
Consider airplanes. In the early 1900s, the skies were ruled by Zeppelins. Then World Wars I and II came along and sped along plane development. By the end of those two wars, airplanes were the dominant flight technology and Zeppelins mere relics.
Now, there are a lot of factors at play in that example and I won’t pretend to be a dirigible history expert, but the general idea is sound: technology is propelled by the era in which it undergoes development.
As such, these times are a hotbed of potential for a number of tech stocks. I mean, consider all the remote viewing and conferencing companies that have seen huge surges in value since the coronavirus hit.
But perhaps the biggest opportunity of all lies within the 5G sector.
That’s because we could, practically overnight, see a radical shift in the way we work in the developed world. That in and of itself would be a huge boon for 5G stocks, potentially sending share prices skyrocketing, should the new work world demand higher-speed Internet.
Couple that with the projections of 5G tech growing over the years regardless, and you have one of the most potential-filled industries on the market.