18th Nov 2021
If you’ve previously dismissed 5G as something that’s only exciting to gamers and mobile phone addicts, you could be overlooking a significant investment opportunity in a sector that’s already blossoming and expected to show serious growth over the next few years.
Why 5G goes beyond gaming
5G offers immense potential in a number of use cases and industries. For a start, it’s hoped that 5G’s greater range can finally bring reliable internet to every point on the globe, including low and middle income countries (LMICs) and rural areas in otherwise highly-connected nations.1
The low latency, greater reach, and increased device capacity of 5G intersects with the rise of other new technologies, including Internet of Things (IoT) devices which rely on 5G for real-time data sharing; artificial intelligence (AI) and machine learning (ML) applications that need its remote high compute power; and augmented reality (AR) and virtual reality (VR) applications which draw on 5G’s low latency and high bandwidth.
Analysts believe that 5G could be instrumental in the post-covid economic recovery, with PWC (PricewaterhouseCoopers) calculating that 5G could deliver a total uplift of $1.3 trillion for the US economy. 2
5G stocks could change everything
The benefits go beyond the economy. Wilson Chow, Global Technology, Media and Telecommunications (TMT) Leader Partner at PwC China, comments “When 5G is used in combination with AI, extended reality (XR), edge computing and the Internet of Things (IoT), it will enable business and society to realise the full benefits of these other technological advances.”3
For example, 5G can help fix America’s healthcare system by connecting healthcare providers with fast data sharing, supporting telehealth consultations, and enabling round the clock remote health monitoring. Industrial plants anticipate using 5G for better AI and ML predictions to make manufacturing safer and more efficient. Agronomists are combining 5G connectivity with IoT monitors to increase yields without a parallel rise in the use of water, fertilizers, or pesticides, thereby reducing stress on the planet’s resources.4 Additionally, 5G networks promise smart cities, with smart infrastructure and utilities that reduce waste and improve access to resources.
5G is real and it’s here
The promise of 5G is already being realized. 5G and 5G-capable devices are hitting the market, going beyond smartphones to include laptops, tablets, and routers and modems that support 5G home WiFi.
Global manufacturers are already adopting 5G, with 56% telling a Manufacturing Institute study that they plan to test or use 5G before the end of 2021.5 Factories already using 5G networks include Fujitsu in Japan6, General Motors and Honeywell in the US7, and KUKA in Germany8.
A number of 5G networks are already operational, with Verizon and T-mobile competing for the US market. T-Mobile announced that 99% of the population will have access to its 5G network within 6 years9, and Verizon’s 5G Ultra Wideband network is up and running in 42 major cities. 10
In December 2020, PCMag’s lead mobile analyst Sascha Segan advised readers to turn off 5G on their smartphones because it would drain the battery without any benefits. But this month he reversed his position, writing “The 5G situation in the US is changing fast, and if you’re on Verizon or T-Mobile, it’s time to take advantage of the speedups.”11
The many ways to invest in 5G
Investors have been quick to respond to the exciting potential of 5G stocks, but even cheap 5G stocks are best acquired for long-term gain rather than for a quick profit. Some investors are attracted by the disruptive technology; others by the prospect of increasing prosperity for underserved regions; and there are even ESG (Environmental, Social and Governance) investors drawn by 5G’s potential in reducing waste and energy use.
5G infrastructure stocks
When it comes to choosing the best 5G stocks to buy, there are a number of aspects of the sector to consider. For example, a 5G stock like Ericsson focuses on the infrastructure for 5G networks. Over the past few months, Ericsson has announced new and extended partnerships with telecommunications companies around the world, including Vodafone in Germany12; Virgin Media in the UK13; Swiss carrier Swisscom14; New Zealand provider 2degrees15; Entel, the largest telco company in Chile16; Emirati carrier Etisalat17; and Indonesian communications service provider Indosat Ooredoo.18
Ericsson delivers a range of 5G services, from extending wireless broadband coverage across more areas19, to cutting-edge Fixed Wireless Access (FWA) provision for fiber-internet-like wireless speeds for crowds at hotspots20. The company has been recognized as a market leader in global 5G network infrastructure in 2020 by Frost & Sullivan21, and as a Leader in Gartner’s 2021 Magic Quadrant for 5G Network Infrastructure for Communications Service Providers.22
5G network stocks
Alternatively, look at 5G network stocks, such as the surprise hit Nokia. Nokia moved on from its early history as a mobile phone company and recently exploded as a 5G stock. Most recently, Nokia announced a new 5G network order from A1 Telekom Austria Group to operate in Bulgaria, Serbia, and Slovenia23; a deal with Union Wireless to modernize its 4G/5G networks24; and the deployment of its solution in a new optical network across Australia.25
Nokia’s Q2 2021 earnings results reported a 4% rise in revenue to €5.313 million, which includes a 15% rise in revenue and 145% rise in profits for network infrastructure. The company has revised its full-year outlook for 2021 from €21.7 billion to €22.7 billion, with an ongoing operating margin of 7-10%.26
5G stocks for microprocessor chips
One more potential type of 5G companies stock to buy is one like AMD or Nvidia, which produce microprocessor chips that form the brain in every 5G device. COVID-19 triggered a global chip shortage and only now are 5G chip prices starting to fall again as supply finally catches up.27 The last few months saw a wave of government investment in local chip production, testimony to its crucial role.28
The trend has been beneficial for Nvidia, which saw its annual revenue boom at a Compound Annual Growth Rate (CAGR) of 27% to $16.7 billion in fiscal year 202129. The company’s Graphics Processing Units (GPUs) dominate the gaming market, which is predicted to grow at 14% CAGR through to 202630, and it is now branching out to produce Data Processing Units (DPUs) and Central Processing Units (CPUs) of its own, directly challenging giants like Intel31. Analysts forecast that Nvidia will see earnings grow 49% over the previous year.32
Meanwhile, Nvidia’s competitor AMD is also showing a strong performance, announcing in July that its quarterly revenue had almost tripled to $1.6 billion in 12 months33 and overall revenue grew by 99% to $3.9 billion in Q2 202134. AMD’s rise has been boosted by its acquisition of Xilinx, the industry leader in adaptable, field-programmable gate array (FPGA) chips35, and its recent unveiling of the new Radeon PRO W6000X GPU36, to the extent that it’s stealing market share from industry giant Intel.37
A 5G ETF offers a range of 5G stocks to invest in
Alternatively, you could invest in a 5G ETF like Defiance’s FIVG, which offers exposure to a full range of top 5G stocks with a single investment. The FIVG ETF helps balance your portfolio across some of the top 5G companies to invest in right now, including established giants as well as new emerging companies.
ETFs can be easily bought and managed via a broker or app, trading just like a single 5G stock, but with access to a broader spectrum of 5G stocks. For investors excited about investing in 5G stocks, an ETF could potentially be one of the simplest way to jump in.
1 “5G in rural areas bridges a gap that 4G doesn’t, especially low- and mid-band” September 14, 2021 https://arstechnica.com/features/2020/09/5g-03-rural/
2 “The global economic impact of 5G” https://www.pwc.com/gx/en/tmt/5g/global-economic-impact-5g.pdf
3 “The global economic impact of 5G” https://www.pwc.com/gx/en/tmt/5g/global-economic-impact-5g.pdf
4 “When the number of broadband connections per rural household doubled, corn yields increased by close to 4%,” taken from OFFICE OF ECONOMICS AND ANALYTICS RELEASES WORKING PAPER SHOWING POSITIVE IMPACT OF RURAL BROADBAND ON FARM PRODUCTIVITY” December 15, 2020 https://www.fcc.gov/document/paper-shows-positive-impacts-rural-broadband-farm-productivity
5 “How 5G is Transforming the Manufacturing Landscape” March 2021 https://www.themanufacturinginstitute.org/wp-content/uploads/2021/03/Manufacturing-Institute-5G-study.pdf
6 “Fujitsu Launches Private 5G Network to Realize ‘Smart Factory’ at its Oyama Plant” March 30, 2021 https://www.fujitsu.com/global/about/resources/news/press-releases/2021/0330-01.html
7 “Verizon Business deploys 5G Ultra Wideband indoors at General Motors and Honeywell” November 19, 2020 https://www.verizon.com/about/news/verizon-5g-ultra-wideband-general-motors-honeywell
8 “KUKA Deploys 5G In Augsburg Plant” August 4, 2021 https://www.automationworld.com/communication/article/21590745/kuka-deploys-nokia-5g-in-augsburg-plant
9 “How 5G Will Bring High-Speed Internet To Underserved Communities” April 9, 2021 https://www.forbes.com/sites/tmobile/2021/04/09/how-5g-will-bring-high-speed-internet-to-underserved-communities/?sh=3204dad61ac7
10 “Verizon 5G Business Internet: Now In 42 US Cities” July 15, 2021 https://www.crn.com/news/networking/verizon-5g-business-internet-now-in-42-us-cities
11 “On Verizon and T-Mobile, It’s Time to Turn 5G Back On” August 25, 2021 https://www.pcmag.com/news/on-verizon-and-t-mobile-its-time-to-turn-5g-back-on
12 “Vodafone strengthens European partnership with Ericsson through new 5G Core contracts” June 17, 2021 https://www.ericsson.com/en/news/2021/6/vodafone-strengthens-european-partnership-with-ericsson
13 “Virgin Media O2 selects Ericsson 5G Core to power Standalone network” July 26, 2021 https://www.ericsson.com/en/news/2021/7/ericsson-5g-core-selected-to-power-standalone-network-deployment
14 “Ericsson and Swisscom strategic partnership extension to include 5G Standalone” May 3, 2021 https://www.ericsson.com/en/news/2021/5/swisscom-5g-standalone
15 “New Zealand’s 2degrees selects Ericsson as sole 5G RAN partner” April 14, 2021 https://www.ericsson.com/en/news/2021/4/2degrees-new-zealand-opts-for-ericsson-5g
16 “Ericsson signs a 5G and IoT agreement in Chile” July 5, 2021 https://developingtelecoms.com/telecom-technology/wireless-networks/11449-ericsson-signs-a-5g-and-iot-agreement-in-chile.html
17 “Etisalat and Ericsson partner to commercially deploy 5G high-band in the UAE” June 20, 2021 https://www.ericsson.com/en/news/5/2021/etisalat-and-ericsson-partner-to-commercially-deploy-5g-high-band-in-the-uae-
18 “Indosat Ooredoo launches Ericsson-powered 5G in Jakarta” August 27, 2021 https://www.ericsson.com/en/press-releases/2/2021/8/indosat-ooredoo-launches-ericsson-powered-5g-in-jakarta
19 “New Zealand’s 2degrees selects Ericsson as sole 5G RAN partner” April 14, 2021 https://www.ericsson.com/en/news/2021/4/2degrees-new-zealand-opts-for-ericsson-5g
20 “Etisalat and Ericsson partner to commercially deploy 5G high-band in the UAE” June 20, 2021 https://www.ericsson.com/en/news/5/2021/etisalat-and-ericsson-partner-to-commercially-deploy-5g-high-band-in-the-uae-
21 “Ericsson positioned as the leader in Frost Radar™: Global 5G Network Infrastructure Market, 2020” April 7, 2021 https://www.ericsson.com/en/news/2021/4/ericsson-top-ranking-on-5g-frost-radar
22 “Ericsson named a Leader in the 2021 Gartner Magic Quadrant for 5G Network Infrastructure for Communications Service Providers report” February 23, 2021 https://www.ericsson.com/en/press-releases/2021/2/ericsson-named-a-leader-in-the-2021-gartner-magic-quadrant-for-5g-network-infrastructure-for-communications-service-providers-report
23 “Nokia expands 5G radio and core contract with A1 Telekom Austria Group into new markets” August 23, 2021 https://www.nokia.com/about-us/news/releases/2021/08/23/nokia-expands-5g-radio-and-core-contract-with-a1-telekom-austria-group-into-new-markets/
24 “Nokia chosen to modernize Union Wireless’ Radio Access Network” August 25, 2021 https://www.nokia.com/about-us/news/releases/2021/08/25/nokia-chosen-to-modernize-union-wireless-radio-access-network/
25 “Nokia and Vocus launch 200G optical network in Australia” August 16, 2021 https://www.nokia.com/about-us/news/releases/2021/08/16/nokia-and-vocus-launch-200g-optical-network-in-australia/
26 “Nokia Corporation Financial Report for Q2 and Half Year 2021” July 29, 2021 https://www.nokia.com/about-us/news/releases/2021/07/29/nokia-corporation-financial-report-for-q2-and-half-year-2021/
27 “4G chip prices to rise, 5G hardware is getting cheaper” August 21, 2021 https://www.gsmarena.com/4g_chip_prices_to_rise_5g_hardware_is_getting_cheaper-news-50613.php
28 “Senate passes $250 billion bipartisan tech and manufacturing bill aimed at countering China” June 8, 2021 https://www.cnbc.com/2021/06/08/senate-passes-bipartisan-tech-and-manufacturing-bill-aimed-at-china.html “EU says its ready to invest ‘significant’ funds in chip sector” May 20, 2021 https://www.reuters.com/technology/eu-says-its-ready-invest-significant-funds-chip-sector-2021-05-20/ “South Korea plans to invest $450bn to become chip ‘powerhouse'” May 13, 2021 https://asia.nikkei.com/Business/Tech/Semiconductors/South-Korea-plans-to-invest-450bn-to-become-chip-powerhouse “China unveils policies to boost chipmakers as tensions with U.S. rise. Analysts say they may not help” August 10, 2020 https://www.cnbc.com/2020/08/11/china-policies-to-boost-chipmakers-as-tensions-with-us-rise.htm
29 “Nvidia Has Turned $10,000 Into $250,000. Here’s Why It Can Do It Again” August 10, 2021 https://www.fool.com/investing/2021/08/10/nvidia-has-turned-10000-into-250000-heres-why-it-c/
30 “2 Reasons Why This Is One of the Hottest Growth Stocks to Buy Right Now” June 5, 2021 https://www.fool.com/investing/2021/06/05/2-reasons-why-this-is-one-of-the-hottest-growth-st/
31 “Nvidia Stock Hits Buy Point On Data Center, AI Advancements” April 13, 2021 https://www.investors.com/news/technology/nvidia-stock-nears-buy-point-on-data-center-ai-advancements/
32 “Nvidia Has Turned $10,000 Into $250,000. Here’s Why It Can Do It Again” August 10, 2021 https://www.fool.com/investing/2021/08/10/nvidia-has-turned-10000-into-250000-heres-why-it-c/
33 “Hey Intel, AMD’s CEO is also ready to ‘fight for every socket,’ while producing strong growth” July 28, 2021 https://www.marketwatch.com/story/amd-stock-rises-as-data-center-gaming-segment-sales-nearly-triple-11627417746?mod=article_inline
34 “Why AMD Stock Jumped to a New All-Time High Today” August 4, 2021 https://www.fool.com/investing/2021/08/04/why-amd-stock-jumped-to-a-new-all-time-high-today/
35 “Here’s Why AMD’s Acquisition of Xilinx Is Such a Great Deal” July 30, 2021 https://www.fool.com/investing/2021/07/30/heres-why-amds-acquisition-of-xilinx-is-such-a-gre/
30 “Why AMD Stock Jumped to a New All-Time High Today” August 4, 2021 https://www.fool.com/investing/2021/08/04/why-amd-stock-jumped-to-a-new-all-time-high-today/
37 “AMD stock scores sixth straight record high as more data shows gains against Intel” August 4, 2021 https://www.marketwatch.com/story/amd-stock-gunning-for-sixth-straight-record-high-following-more-data-showing-market-share-gains-on-intel-11628098312