The 5G revolution is here, and it’s growing faster than expected. 5G is the fifth-generation of cellular network technology that will be a massive upgrade to 4G in terms of speed and functionality. Its potential impact on how we live, work and pursue leisure has been compared to a fourth industrial revolution. This means it’s worth noting the 5G companies and 5G stocks best positioned to drive growth in this space.
Benefits of 5G
Apart from super fast, reliable cellphone service, 5G is set to bring benefits to many sectors including automotive, smart cities, manufacturing and retail. 5G also supports the Internet of Things (IoT), which involves millions of sensors that monitor cities, roads and other infrastructure. 5G will allow these sensors to connect with each other through a “network of networks” (NoN), which is a collection of distributed 5G networks that share information with each other, allowing the 5G network to grow in scale as 5G services roll out, without significant increases in network costs.
Many believe that 5G will open up a whole new dimension in virtual reality, augmented reality and smart city applications such as driverless cars. 5G is also expected to have significant impact on the agriculture market with precision farming using 5G sensors. 5G could help farmers get better insight into their crop and livestock needs, allowing fruit to be picked on time and water to be saved and distributed as needed. Remote healthcare applications will also benefit from 5G, as sensors monitor patients and 5G networks ensure fast and low latency-data exchange for effective care.
5G is Growing Rapidly
The 5G ecosystem is growing and it’s hard to know what companies will win the race. In the meantime, there are a number of companies leading the charge to make 5G a reality for many businesses and consumers. Nokia has a market cap of $18.5 billion and has become a key player in 5G since selling their mobile phone division to Microsoft. Last quarter Nokia came out of nowhere and surprised the street with $6.1 billion in revenue due to 5G growth. Sales of its network infrastructure grew 28% to $1.7 billion, and the gross margin was up 36%.
Nvidia has also seen strong growth over the past year. It recently announced a partnership with Google’s innovation lab, towards providing artificial intelligence (AI) on the 5G network at breakneck speeds. Meanwhile Ericsson are focusing on 5G hardware and NXP Semiconductors are set to provide the chips. These are just some of the names leading in the 5G space, which is made up of a wide range of companies, from real estate firms that physically host 5G antennae to cloud companies best positioned to offer subscription services via 5G. This makes it hard to know which particular stocks deserve your attention.
Using 5G ETFs to Invest
One investment strategy is to use a 5G exchange-traded fund or ETF. This provides diversification, as well as the potential for gains in what could be a massive market. An ETF can be traded like a stock, but its value is linked to an index of a bundle of stocks, in this case chosen around the theme of 5G. ETFs help mitigate risk of over exposure to one single company, while allowing investors to gain exposure to a sector or space they believe has scope for growth.
5G networks have already begun operation around the world. And as they expand further, industrial, commercial, environmental and governmental use-cases are likely to flourish too. As an investor it’s worth considering how to best position your portfolio to gain from this potential growth.
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