[Editor’s note: “7 5G Stocks to Connect Your Portfolio To” was previously published in November 2019. It has since been updated to include the most relevant information available.]
I have discussed the importance of various 5G stocks to buy before, but, of course, such a notion is nothing new. This latest telecom innovation represents a shift in the industry. Major players and even government bodies have pushed for 5G integration. But to truly understand the phenomenon behind 5G stocks, we should look back in time to the 4G upgrade.
It’s been more than a decade since the first 4G handset hit U.S. retail stores. Back then, we witnessed the same challenges that we must address today; namely, the lack of viable networks.
However, the massive increase in data transmission speeds made efforts to overcome the challenges worthwhile. For instance, some early 4G networks download speeds of 100Mbps, substantially greater than an average 3G download speed of 2Mbps. That’s the allure of 5G stocks.
Moreover, think about the amazing technologies that either sprouted or were improved via 4G’s introduction. For example, we take for granted today that we can hail a ride through Uber (NYSE:UBER) or Lyft (NASDAQ:LYFT). But the viability of this platform was really only possible through the 4G network. The same can be said about mobile streaming on services such as Netflix (NASDAQ:NFLX).
In other words, 5G doesn’t just offer an industry from which to pick stocks to buy. Instead, this technology enables other technologies to flourish. It’s a force-multiplier, one that comes around only once every several years.
With that, here are my seven picks for 5G stocks to buy:
AT&T (NYSE:T) is a name that almost everyone is familiar with. However, it doesn’t get much love as a candidate for stocks to buy. Even though T stock represents an iconic brand, the underlying company has unprecedented debt levels from expensive acquisitions.
Even worse, those acquisitions apparently aren’t gaining satisfactory traction. Of course, I’m referring to the $85 billion Time Warner acquisition. Initially, AT&T bought the company on hopes of original content strength and streaming revenue opportunities. However, fears of AT&T cannibalizing itself has put off some investors from T stock.
But with all due respect, I think this perspective is shortsighted, as signified by the recent AT&T rally. I believe AT&T is one of the best 5G stocks to buy. With the coming network rollout, it’s not just about technological prowess; instead, the rollout will require massive resources and wide-ranging telecom assets.
Few names have the capacity to integrate 5G competently. Although it has some big issues, T stock is one of those players.
Under almost any other circumstance, Qualcomm (NASDAQ:QCOM) would easily qualify as one of the best 5G stocks to buy. Thanks to its next-generation chips, Qualcomm has an early head start on this transformative telecom innovation. That right there is a good enough reason to seriously consider QCOM stock.
However, legal troubles with Apple (NASDAQ:AAPL) have cast a dark cloud over QCOM stock.
Typically, semiconductor firms sell licenses of their core technologies, but Qualcomm charges royalties on top of innovations that are only loosely associated with the initial license.
After settling the suit last year, Qualcomm added about 50% to its stock price and has since marched steadily upward.
As I have argued in the past, tech firms have ceased to exist in a vacuum. Instead, we’re in a tech cold war for future digital dominance. Therefore, I believe the future is bright for QCOM stock because, well, it has to be.
Speaking of vacuums, the 5G industry itself doesn’t ply its trade in isolation. Instead, you see natural synergies and partnerships to help make the most of the tech in the shortest time possible. That’s why on your shopping list of 5G stocks to buy, you shouldn’t overlook Micron Technology (NASDAQ:MU) and MU stock.
Earlier this year, Micron and Qualcomm announced a partnership to develop 5G-enabled autonomous driving platforms. This is a great example of the far-reaching impact of 5G technologies. With exponentially faster transmission speeds, autonomous vehicles can more quickly transition from concept to reality. Additionally, 5G speeds should make such AVs safer as they can react to dynamic conditions or dangers.
Another plus for MU stock is the geopolitical environment. Micron of all companies on my list of stocks to buy recognizes the economic threat that is China. After suffering sometimes brazen acts of corporate espionage, Micron realizes that American tech firms haven’t played on equal ground with the Asian juggernaut.
But thanks to the no-nonsense Trump administration, MU stock has some executive support. Moving forward, I like that measure of confidence.
If you’re a hardcore gamer, you typically associate Nvidia (NASDAQ:NVDA) with its gaming-centric graphics processors.
However, the semiconductor firm has evolved into a comprehensive tech umbrella, providing solutions with data science, artificial intelligence, and deep learning. But what does this have to do with 5G stocks to buy?
Simply, we’re moving to a point now where no tech innovation occurs in isolation. Prior to 4G, most computerized solutions focused on data analytics and big data. But with 4G’s data-transmission speed upgrade, engineers were able to realize multiple AI applications, such as AVs and other automated platforms. Since Nvidia leads in these innovations, NVDA stock provides attractive exposure.
But with 5G, several industries are looking to take the next step in automation. In many cases, this means that companies are looking to replace human operators with AI-driven systems.
Of course, such a notion is further out on the horizon. Still, I’d keep NVDA stock on my must-watch list, especially since shares are currently deflated relative to their all-time highs.
It’s a theme that consistently runs throughout 5G stocks: no one player owns the entire 5G supply chain. Thus, part of the problem regarding the next-gen telecom rollout is the broader lack of equipment upgrades.
Simply put, 5G requires multiple components, from the network down to the chips used to facilitate data transmissions.
While it might not be a household name, 5G investors should check out Xilinx (NASDAQ:XLNX) and XLNX stock.
For one thing, the company has introduced a groundbreaking chipset that covers the entire sub-6 GHz spectrum. This is essentially the radio frequency that makes 5G possible.
Second, several 5G players already use Xilinx chips. That number will surely rise as the rollout deepens. Furthermore, Xilinx will likely pick up additional clients, making XLNX stock an attractive proposition.
Finally, Xilinx offers critical solutions in growing and lucrative markets such as AI and data centers. Thus, no matter what happens with 5G, XLNX stock will likely benefit from robust demand.
Without any historical context, 5G investors would probably peg Ericsson (NASDAQ:ERIC) as one of their top stocks to buy.
After all, Ericsson provides the communications equipment that makes the 5G rollout practically accessible. Therefore, ERIC stock is an easy buy.
Of course, Ericsson’s long-term price chart tells a different tale. During the tech bubble of the late 1990s to early 2000s, ERIC stock was a legitimate three-digit security. As we all know, the bursting of that bubble deflated virtually all tech players.
Later, ERIC stock peaked around the $20 level before collapsing during the last major housing crisis and the Great Recession. With shares currently trading hands at under $10, I can understand the hesitation regarding holding the bag.
However, Ericsson does have a major geopolitical tailwind in the form of the U.S.-China trade war. With Huawei at least temporarily out of the picture, Ericsson has an opportunity to take advantage. This is one of the riskier propositions among 5G stocks to buy. But if you can stomach it, ERIC stock offers an intriguing opportunity.
Analog and mixed-signal semiconductor supplier Semtech (NASDAQ:SMTC) offers natural exposure to 5G, along with other lucrative segments like the Internet of Things, data centers, and mobility. That said, SMTC stock has seen better days. Shares enjoyed a solid start to the year before negative earnings revisions for the year attracted volatility.
However, I believe the nearer-term volatility in SMTC stock is just a blip on the radar. For one thing, Semtech features very stable financials. It has a relatively small debt load relative to its cash holdings.
Moreover, Semtech has delivered consistently positive earnings, leading to an equally consistent free cash flow. Thus, the company can respond to fresh opportunities without worrying about the financial impact.
Second, the 5G network is bound to grow in both scope and complexity. Not only are individual companies racing for an edge, so too are countries. Such dynamics provide a pathway to profitability for SMTC stock, making the nearer-term noise just that: noise.
As of this writing, Josh Enomoto was long T stock.