If You Want to Earn Big Returns in Tech, Read This
In technology investing, few opportunities are as profitable as the “next big thing.”
In the 1980s, personal computers (PCs) were the next big thing. By capitalizing on the PC market, companies like Microsoft Corporation (NASDAQ:MSFT) and Intel Corporation (NASDAQ:INTC) made huge profits. Early investors in those two companies were rewarded with astronomical returns.
In the 1990s, the Internet was deemed the next big thing. While not every Internet company survived the burst of the dotcom bubble, those that carved out a niche eventually became giants in their respective fields.
Just take a look at the stock charts of Amazon.com, Inc. (NASDAQ:AMZN) and Google—which trades as Alphabet Inc (NASDAQ:GOOG)—and you’ll see what I mean.
And just as people thought that was it, plenty more “next big things” showed up, such as social media, on-demand video streaming, and smartphones.
Again, investors who bet on the winning companies in these industries—Facebook, Inc. (NASDAQ:FB), Netflix, Inc. (NASDAQ:NFLX), and Apple Inc. (NASDAQ:AAPL), in particular—reaped huge profits.
Now, shares of the companies that I talked about so far have all gotten expensive. And some might even say that the bulk of the profits have already been made in the aforementioned industries.
For today’s investors looking for a big score, where is the next big thing? 5G could be it.
The “Next Big Thing” Opportunity
5G is the latest iteration (fifth generation) of cellular mobile communications technology.
As the numbering system suggests, 5G comes after 4G—a technology that many people are already using.
What’s the difference? Well, as you might expect, 5G will make things faster.
The neat part is, compared to 4G, 5G is going to feel more like a revolution than an evolution. That’s because it’s not just going be a little bit faster, it will be a lot faster.
To see how big of a difference 5G could make, here are the numbers.
When transmitting data, 4G networks usually top out at 100 megabits per second. With 5G, the speed can reach up to 10 gigabits per second, making it 100 times faster than current technology.
With that kind of speed, you’d be able to download a full movie wirelessly in just a few seconds.
At the same time, 5G will massively reduce latency—to as low as less than one millisecond. For applications that need real-time feedback, the technology will lead to a huge improvement in responsiveness.
Needless to say, this is going to change the way people—as well as devices—communicate with each other.
And it’s not just going to affect telecoms and original equipment manufacturers (OEMs). With a hundredfold increase in speed and greatly reduced latency, 5G technology will likely find applications in various other industries, such as transportation and healthcare.
How to Make a Profit From 5G
Now, the big question is: “Who will be the winner of this next big thing?”
Well, several carriers have plans to deploy 5G networks this year. And device makers are rushing to come out with their latest gadgets.
Betting on these companies is certainly one way to make a profit. But keep in mind that not every company is going to be a winner.
We don’t need to look that far back to remind ourselves of the risk associated with investing in “next big thing” stocks.
While Apple stock had a massive rally over the company’s success of the “iPhone,” BlackBerry Ltd (NYSE:BB)—Apple’s main smartphone competitor in the late 2000s—is completely out of the device-making business now and its stock price has fallen deep into the doldrums.
In the case of 5G tech, there’s a way to capitalize on the “next big thing” without worrying about which company will come up on top.
You see, while I have yet to hold a 5G smartphone in my hand, I do know of a company that’s already making millions of dollars from the upcoming 5G deployment: Keysight Technologies Inc (NYSE:KEYS).
Keysight Technologies is not launching its own 5G network or building its own 5G device. Instead, the company provides a wide range of solutions to help optimize networks and bring electronic products to market faster, at a lower cost.
The company’s current offerings include design simulation, prototype validation, manufacturing testing, and network optimization.
Now you can probably see where this is going. As carriers and equipment manufacturers try to get on the 5G bandwagon, Keysight’s services could come in handy.
Indeed, according to the company’s latest earnings report, its “Communications Solutions Group” revenue surged 23% year-over-year to $566.0 million in the quarter ended October 31, 2018.
Keysight Technologies noted that 5G-related research and development spending was a major driver behind that growth. (Source: “Keysight Technologies Reports Fourth Quarter 2018 Results,” Keysight Technologies Inc, November 20, 2018.)
Keysight Technologies is not just operating in the United States. It has customers around the globe in multiple industries, including communications, aerospace, defense, automotive, energy, semiconductor, and general electronics.
As countries around the world get ready for 5G network deployment, Keysight stands ready to profit. For investors looking to capitalize on the “next big thing” in tech, KEYS stock should be near the top of their watch list.