Investing In 5G: Strategies For Profitable Opportunities

The fifth generation of wireless technology, 5G, is expected to revolutionise the way we connect to the world, with speeds up to 100 times faster than 4G and greater capacity for multiple devices to connect to the network. With the potential to transform industries from agriculture to healthcare, 5G is an attractive prospect for investors. There are several ways to invest in 5G, from mobile carriers to chipmakers and cloud computing providers.

One option is to invest in mobile carriers such as T-Mobile, Verizon, and AT&T, which are all promoting their 5G networks and offering premium plans with unlimited 5G data. Alternatively, investors can consider companies that provide the infrastructure for 5G, such as cell tower operators Crown Castle International and American Tower Corporation.

Another option is to invest in chipmakers that produce high-powered chips for smartphones and other devices that support 5G connectivity. Companies such as Broadcom, Qualcomm, and Nvidia are well-positioned to benefit from the rollout of 5G.

Investors can also consider exchange-traded funds (ETFs) that focus on 5G, such as the Defiance Connective Technologies ETF, Vanguard Communication Services ETF, and Fidelity MSCI Communication Services Index ETF.

While 5G is still in the early stages of deployment, it has the potential to disrupt multiple industries and create significant growth opportunities for companies in the coming years.

Invest in 5G-focused ETFs

5G ETFs, or exchange-traded funds, are a great way to gain exposure to the 5G sector without needing to pick individual stocks. 5G ETFs are also less volatile than individual stocks and provide instant diversification. Here are some things to keep in mind when investing in 5G-focused ETFs:

Diversification and Volatility

ETFs are a great way to diversify your portfolio and reduce risk. By holding a basket of individual stocks, ETFs provide instant diversification, and their prices are generally less volatile than individual stocks. This is especially true for 5G ETFs, as 5G cuts across a wide swath of the technology industry, allowing you to gain exposure to a variety of companies and sectors within the 5G space.

Research and Due Diligence

When choosing a 5G ETF, it's important to do your research and conduct due diligence. Look at the holdings of the ETF to see which companies and sectors it is invested in. Consider the expense ratio, which is the fee charged by the fund manager, and the dividend yield, which is the income generated by the ETF. Also, check the performance of the ETF over time and compare it to its peers.

Long-Term Investment

Remember that investing in 5G is a long-term proposition. 5G technology is still in the early stages of implementation, and it will take time for the full potential of 5G to be realized. As with any investment, there will be volatility along the way, but thinking long-term will help you ride out the ups and downs of the market.

First Trust Indxx NextG ETF (NASDAQ: NXTG)

This ETF provides exposure to companies helping to develop and deploy 5G technology, including device makers like Apple and LG Electronics, and semiconductor companies like AMD and Broadcom. It has a dividend yield of 1.96% and an expense ratio of 0.70%.

IShares U.S. Telecommunications ETF (NYSEMKT: IYZ)

The iShares U.S. Telecommunications ETF is a good option for those seeking investment income. The fund focuses on telecommunications providers, with AT&T and Verizon making up about 20% of its holdings. It has a dividend yield of 2.36% and an expense ratio of 0.40%.

Vanguard Communication Services ETF (NYSEMKT: VOX)

With over $4 billion in assets under management, the Vanguard Communication Services ETF is the largest telecom-related ETF. It provides exposure to service providers like Verizon and AT&T, as well as cloud computing and software giants like Alphabet (Google) and Netflix. The ETF has an affordable expense ratio of just 0.1%.

Defiance Next Gen Connectivity ETF (FIVG)

The Defiance Next Gen Connectivity ETF focuses on companies building 5G infrastructure, including chipmakers like Advanced Micro Devices and Qualcomm. It has an expense ratio of 0.30% and has seen its share price increase by more than 50% since its launch in early 2019.

Global X Internet of Things ETF (NASDAQ: SNSR)

The Global X Internet of Things ETF is a secondary play on the 5G revolution, investing in companies focused on technologies that benefit from the rollout of 5G. This includes companies developing the Internet of Things, such as wireless technology chipmaker STMicroelectronics and healthcare sensor firm Dexcom. The ETF has an annual dividend yield of around 0.6%.

Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF (NYSEMKT: SRVR)

This ETF provides exposure to 5G technology by investing in real estate investment trusts (REITs) that own data centers or cellphone towers. It has an expense ratio of 0.60% and a dividend yield of 4%, making it an excellent option for income-focused investors.

Invest in individual stocks of mobile phone carriers

Mobile phone carriers began rolling out 5G networks in 2019. As of 2024, all major carriers in the US have deployed 5G, covering about 200 million devices.

The most direct route to 5G investing is through mobile carriers such as T-Mobile, Verizon, and AT&T. These companies are still investing in and promoting their 5G networks. T-Mobile acquired Sprint in 2020 to accelerate its next-gen network deployment and has since grown into the No. 2 market position behind Verizon. Verizon is the largest mobile carrier in the US and has pursued sweeping plans for 5G that include better customer service and new applications, such as for smart cities and factories employing robotics and wirelessly connected equipment. AT&T has also been focusing on advancing its 5G network, improving its financial position and cash flow while growing its subscriber base.

When investing in 5G stocks, it's important to think long-term. 5G stock prices will rise and fall in the short term, but the general trend should be up over the next decade.

Invest in chipmakers

Investing in chipmakers is a great way to get involved in the 5G industry. Here are some things to consider when investing in chipmakers for 5G:

Semiconductor Companies

Semiconductor companies are key players in the 5G space as they provide the chips that make 5G work. These companies are involved in designing and manufacturing chips that enable high-speed data transfer and connectivity for various devices and applications. Broadcom, Qualcomm, Marvell Technology Group, and Nvidia are some of the top semiconductor companies to consider. Broadcom, for example, offers a diverse range of chips and electronic components for phones and networking hardware. Qualcomm is a leader in mobile computing chips, with its products being used in almost every smartphone globally.

Chipset Manufacturers

The 5G chipset market is expected to grow significantly, reaching US$78.3 billion by 2032. Leading chipset manufacturers are focusing on launching cost-effective and innovative products to stay competitive. Some of the top chipset manufacturers to consider include Huawei Technologies, Infineon Technologies, Intel Corporation, and MediaTek. These companies offer a range of semiconductor products and solutions for various industries, including consumer electronics, automotive, and networking.

Research and Development

When investing in chipmakers, it is important to consider their research and development capabilities. Companies that invest heavily in R&D are better positioned to innovate and adapt to the rapidly changing 5G landscape. For example, Qualcomm has been actively involved in the development of 5G industry standards and has made technological innovations in millimeter-wave and antenna technology. Additionally, Advanced Micro Devices' acquisition of Xilinx in 2022 gave the company access to a best-in-class R&D department, improving its profitability and positioning in the 5G market.

Acquisitions and Partnerships

Another factor to consider is the chipmakers' strategic acquisitions and partnerships. By acquiring or partnering with companies that possess complementary technologies or have a strong presence in the 5G market, chipmakers can expand their product offerings and gain a competitive edge. Broadcom's acquisition of VMware in 2023 is an example of a strategic move that enhanced its position in networking component design. Similarly, Nokia's acquisition of a majority stake in Alcatel Lucent in 2016 boosted its 5G development capabilities.

Global Presence and Diversification

Investing in chipmakers with a global presence and a diversified customer base can help mitigate risks and take advantage of growth opportunities in different regions. Companies like Qualcomm, Intel, and Samsung have operations and customers worldwide, allowing them to tap into diverse markets and spread their revenue streams. Additionally, chipmakers that serve multiple industries, such as automotive, healthcare, and networking, are better positioned to benefit from the widespread adoption of 5G across various sectors.

Invest in companies that provide 5G infrastructure

Investing in companies that provide 5G infrastructure is a great way to capitalise on the potential of 5G. This includes companies that provide 5G network equipment, tower infrastructure, semiconductors, and hyperscalers, as well as 5G mobile network operators.

5G Network Operators

• T-Mobile US (NASDAQ:TMUS)
• Verizon Communications (NASDAQ:VZ)
• AT&T (NASDAQ:T)
• Dish Networks (NASDAQ:DISH)

5G Technology and Network Equipment Companies

• Ericsson (NASDAQ: ERIC)
• Nokia (NYSE: NOK)
• Samsung (Korea Stock Exchange: KSE)

5G Semiconductor and Chipset Companies

• Broadcom (NASDAQ: AVGO)
• Qualcomm (NASDAQ: QCOM)
• Marvell Technology Group (NASDAQ: MRVL)
• Advanced Micro Devices
• Nvidia (NASDAQ: NVDA)

Real Estate Infrastructure (Tower, DAS, Small Cell) Companies

• American Tower (NASDAQ: AMT)
• Cellnex (Spanish Stock Exchange: CLNX.MC)
• Crown Castle (NYSE: CCI)

Edge Computing and Technology Companies (Hyperscalers)

• Amazon Web Services (AWS) (NASDAQ: AMZN)
• Azure (Microsoft) (NASDAQ: MSFT)

Invest in companies that provide 5G equipment

Investing in companies that provide 5G equipment is a great way to capitalise on the growth of 5G technology. 5G is the fifth generation of wireless networking technology, offering faster speeds and more reliable connections than previous generations. It is expected to bring significant improvements in speed, responsiveness, and scale, supporting bandwidth-hungry applications and technologies.

Ericsson

Telefonaktiebolaget LM Ericsson (ERIC) is a Swedish telecommunication equipment and services company with a strong presence in Europe, North America, and Asia. The company is at the forefront of 5G hardware development and has a market capitalisation of $18.62 billion as of February 2023. Ericsson has been involved in field trials and research programs with major mobile operators worldwide, including Verizon, AT&T, China Mobile, and South Korea's SK Telecom. Their 5G radio prototype, which provides wireless network access, has been deployed for real-world testing in several countries.

Nokia

Nokia Corporation (NOK) is a Finnish multinational company that provides telecommunications equipment, information technology, and consumer electronics. Nokia has entered advanced testing phases for its 5G radio access products, collaborating with companies like Verizon, China Mobile, SK Telecom, and Deutsche Telekom. Nokia has a market capitalisation of $26.16 billion.

Samsung

Samsung is a South Korean multinational conglomerate that operates in various industries, including electronics and semiconductors. They are a leading provider of 5G network infrastructure, supplying base stations and other equipment to mobile network operators worldwide. Samsung has also released several 5G-enabled smartphones and developed 5G chipsets and home routers. The company is listed on the Korea Stock Exchange (KSE) with a market capitalisation of 407.05 trillion KRW.

Qualcomm

Qualcomm Inc. (QCOM) is a California-based company that develops wireless communication technologies, including 3G, 4G, and 5G standards. They produce software and integrated circuits (chipsets) used in wireless network equipment and mobile devices. Qualcomm is pursuing a parallel development strategy covering 4G, 5G, and Wi-Fi technology to support multimode devices. The company has a market capitalisation of $137.90 billion.

Broadcom

Broadcom (NASDAQ:AVGO) is a diversified developer of chips and electronic components for phones and networking hardware. They have expanded their portfolio through strategic acquisitions, including the purchase of cloud and networking giant VMware. Broadcom is listed on the NASDAQ with a market capitalisation of $248 billion.

Marvell Technology Group

Marvell Technology Group (NASDAQ:MRVL) is a leader in developing data processing and networking chips that enable high-speed data transfer. They have broadened their exposure to 5G through acquisitions, such as Inphi and Innovium, to enhance their 5G capabilities.

Other Notable Companies

Other companies worth considering in the 5G equipment space include Advanced Micro Devices (AMD), Nvidia (NASDAQ:NVDA), Corning, Ciena, and Arista Networks (NYSE:ANET).

When investing in 5G equipment providers, it is important to conduct thorough research, assess the companies' financials, and consider the overall market conditions and risks associated with the industry.

Frequently asked questions