Are these the best 5G stocks to watch?
The fifth generation of mobile communication technology is revolutionising industries around the world. We have a look at the types of 5G companies, their role in industry 4.0, and some of the top 5G stocks to watch.
What is 5G technology?
The acronym '5G' refers to the fifth-generation technology standard for cellular networks that are used to connect mobile devices in the telecommunications sector. 5G is the successor technology to 4G and first commenced global adoption in 2019.
As a a cellular network technology, 5G involves the organization of service regions into smaller geographical areas that are referred to as cells. Each cell uses radio waves and basestations to connect 5G wireless devices to either the Internet or telephone network.
5G marks a major advance upon its 4G predecessor, with far higher download speeds and bandwidth. This enables them to function as internet service providers that compete with established networks such as cable.
The enhanced capabilities of 5G could have a transformative impact upon large swathes of the economy, paving the way for widespread digitzation and automation in tandem with other emerging technologies such as artifical intelligence. 5G could make it far more effective to deploy Internet of Things (IoT) technology, for example, completely transforming both urban environments and productive facilities.
This transformative impact is likely to boost the fortunes of those listed companies that can ride the wave of 5G innovations, thus creating potentially lucrative opportunities for investors.
Here is a list of five of the top 5G stocks for investors to watch, if they are interested in the investment possibilities created by the latest telecommunications innovations.
Five of the top 5G stocks for investors to watch
- Nvidia (NASDAQ: NVDA)
- Corning (NYSE: GLW)
- Qualcomm (NASDAQ: QCOM)
- Taiwan Semiconductor (NYSE: TSM)
- Advanced Micro Devices (NASDAQ: AMD)
Nvidia (NASDAQ: NVDA)
Chip company NVIDIA Corp (All Sessions) saw its share price surge in the early 2024 on the extensive use of its graphics processing unit (GPU) in artifical intelligence technology, which is expcted to boom following the development of extremely powerful large language model (LLM) innovations by OpenAI.
The widespread use of Nvidia's high-end GPUs by AI developers attests to the high quality of the company's technology. Nvidia's share price could receive further support from the widepsread use of its GPUs by 5G companies, including telecoms operators and equipment manufacturers.
Nvidia stocks recently came under pressure, dropping 9% amidst a broader sell-off in the tech sector. The company's share price could bounce back, however, given the decline came amidst drops for other top tech stocks including Apple, Meta and Tesla.
Corning (NYSE: GLW)
Originally a legacy glass and ceramics manufacturer, Corning Inc has since emerged as a key supplier of the fibre-optic cables that play a critical role in 5G technology.
While 5G technology is renowned as a form of wireless communications technology, it still requires the extensive use of high-speed cables and physical components to channel electronic data through the fixed infrastructure that is essential to its successful operation.
In addition to fibre-optic cables, Corning also manufactures small cell antennaes and related technology, which play a vital role in deploying 5G networks across physical premises such as building complexes and sports venues.
Simply Wall St. said in April that Corning's share price of US$31.95 might be undervalued by as much as 23%, while the analyst price target for the stock stood at US$34.85.
Qualcomm (NASDAQ: QCOM)
Qualcomm took an early lead in 5G, supplying numerous 5G-enabled modems, modules and processors. Qualcomm’s Snapdragon 888 processor, for example, is used by a string of big brands, including Xiaomi, ASUS, Samsung, Lenovo and Sony.
Its equipment isn’t only used in smartphones, but also forms an important part of everything from gaming PCs to autonomous vehicles, making it a key supplier as the world continues to embrace 5G. This isn’t surprising as the company stated that it expects its equipment to be used by industry segments beyond traditional cellular industries, such as automotive, computing, IoT and networking.
The company has recently teased the launch of a new flagship processor in March, which could be the Snapdragon 8s Gen3 that was leaked earlier in the year.
Taiwan Semiconductor (NYSE: TSM)
Taiwan Semiconductor Manufacturing Co Ltd (TSMC) is one of the world’s largest semiconductors chipmakers. The company has said recent growth has been driven by demand for high-end smartphones as well as the initial roll-out of 5G.
With hundreds of clients, including Qualcomm, Nvidia, and Advanced Micro Devices (AMD), the company’s biggest customer – Apple – accounts for around one-fifth of sales. In early 2022, TSMC squeezed out Samsung to become the sole manufacturer of 5G Radio Frequency (RF) chips for Apple’s iPhone 14.
While TSMC stands athwart mounting tensions in the global semiconductor market, as relations between China and the US continue to remain uncertain, it may be the one company that actually benefits from the renewal of Cold War-style unease.
TSMC receive a stunning US$1.51 billion in subsidies from China and Japan last year, in return for providing investment to these two nations that sit on other side of the current geopolitical divide.
The company posted better-than expected earnings for the first quarter, as well as raised guidance for revenue in the second quarter thanks to demand for AI chips.
Advanced Micro Devices (NASDAQ: AMD)
Advanced Micro Devices recently emerged as a leading company when it comes to field-programmable gate array (FGPA) chips, following its acquisition of industry stalwart Xilinx at the start of 2022. Xilinx possessed best-in-class research and development facilities when it comes to FPGA chips, which are a key component in the deployment of 5G technology.
Because they can be reprogrammed, the use of FGPA chips facilitates the adaption of new hardware to 5G technological application, making them an ideal option for the latest generation of telecommunications equipment.
While AMD's share price is down around 28% after hitting a record high of $227.30 last month, analysts see major upside for the stock, as the declines arrived amidst an all-round drop in indices.
Analyst Frank Lee from HSBC has upgraded AMD from hold to buy, raising his price target from $180 to $225, based on expectations of increased chip demand from AI companies.
5G and the fourth industrial revolution
At its peak, 5G is expected to be up to 100 times faster than 4G.
But 5G is about much more than downloading films quicker or delivering faster connectivity on your smartphone. It marks a huge technological jump that’s expected to have a big impact on what’s being dubbed ‘the fourth industrial revolution’. It’s said that 5G will unlock a wave of new technologies, spanning everything from artificial intelligence (AI) and machine learning to automation and autonomous vehicles.
Apart from better speeds, the other major benefit of 5G is lower latency, which is how long it takes between sending an instruction, like opening a smartphone app, and for that instruction to be completed.
Existing 4G networks have cut down latency to as low as 50 milliseconds, but 5G has the potential to reduce this to around one millisecond.
Fractions of a second may seem insignificant, but quicker download speeds are nothing without better latency, and the anticipated improvement is so drastic that 5G will be capable of handling critical tasks that current networks simply can’t. Driverless cars are a prime example: 49 milliseconds is a huge amount of time for a self-driving vehicle responding to potential incidents on the roads.
5G mobile phones and devices
The faster connectivity that 5G brings is already being experienced through the everyday devices that we use, ie smartphones, tablets, wearable tech and other smart technology. 5G-enabled devices mean smarter and faster technology that’s capable of offering a wider array of services.
With little incentive to spend significant sums on new devices that offer limited improvements from existing ones, consumers often wait longer to upgrade. 5G is changing this. For example, new smartphone releases with upgraded camera capabilities vs 5G-enabled smartphones.
5G chipmakers
The widespread, ongoing adoption of 5G means there’s a market for a swathe of supplementary smart tech – such as chips. This is evident through the success stories of those companies providing crucial components to power all devices that bring 5G to life for individuals and businesses.
5G carriers
The telecoms industry is at the heart of 5G – providing the wireless networks that supply 5G to people and organisations. A big part of this has been building the infrastructures to secure the radio frequency capacity that forms the backbone of the services it provides to customers.
The deployment of 5G networks has been a differentiating factor for many telecoms companies. Further, 5G enables the industry-wide strategy of convergence, whereby you increase the stickiness of a customer by selling them multiple services (eg phone, broadband and TV packages). If customers flock to one telecoms provider because of its 5G network, they’re more likely to buy other services from that company, too.
Demonstrating the ability to provide a reliable and superior 5G network is likely to continue being crucial in securing customers over the initial years. This is particularly true when it relates to mission-critical and high-end applications.
5G infrastructure providers
5G requires a lot more infrastructure than 4G, because it needs to run on higher radio frequency bands to deliver faster speeds. But transmission and coverage both suffer as the frequency increases.
This means more sites (often called small cells) are needed to transmit signals in buildings and on the streets, which require much more infrastructure to be built. So, whereas lower frequencies can cover a wider area, 5G needs more connections to make the network work properly. With more sites being added to carrier networks, the rollout kicked off with deployment in densely populated areas.
5G stocks: looking at the bigger picture
In under three years since the first launch of 5G technology, companies that are responsible for bringing it to life have already been investing huge sums, and even sacrificed returns over the short to medium term.
With some having already suffered a decline in earnings that has spiralled into suspended dividend pay-outs and other impacts, this highlights the importance of giving due consideration to sustainability.
The returns reaped from 4G haven’t been as good as the industry expected and businesses will be keen to not have a repeat of the situation. Still, investors aren’t short on options when it comes to investing in 5G and it may be wise to look at the bigger picture – beyond those building and supplying 5G networks.
There are a huge number of industries that stand to benefit from 5G, everything from internet and data stocks, cloud-computing firms and gaming companies to carmakers, AI and automation technology firms, and smart and IoT device makers.
How to invest in or trade 5G stocks
With us, you can follow these steps to invest in or trade 5G stocks:
- Do your research on 5G thematic stocks
- Create an account or log in
- Choose whether to invest or trade
- Pick your 5G stock
- Open and monitor your position
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Leverage allows you to get full exposure while only committing a deposit, called margin. Regardless of this, your possible profits and potential losses will be in line with the full value of your trade, making it vital that you manage your risk properly.
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