5G wireless technology and 5G stocks are set to become one of the biggest game changers in modern history. This ultra-high speed cellular standard offers a huge increase in download speeds over 4G LTE, but its ripple effects go much further. Once in place, the 5G network and its information superhighway are expected to become the backbone for everything from self-driving cars to augmented reality. It’s also expected to disrupt entire sectors — for example, replacing cable for home broadband internet access.
Each of these eight companies have a big iron in the next generation wireless fire. These 5G stocks offer the potential for big gains as adoption of the technology grows.
- Nokia (NYSE:NOK)
- Ericsson (NASDAQ:ERIC)
- Broadcom (NASDAQ:AVGO)
- T-Mobile (NASDAQ:TMUS)
- Verizon (NYSE:VZ)
- Nvidia (NASDAQ:NVDA)
- Apple (NASDAQ:AAPL)
- Qualcomm (NASDAQ:QCOM)
Here’s why each of these companies — and their shareholders — are poised to reap the rewards of the 5G revolution.
Finland’s Nokia is an obvious beneficiary as telecoms globally scramble to build out their 5G networks. Nokia is a leading supplier of end-to-end 5G solutions. At this point, Nokia says it has completed 31 live 5G networks, with 79 commercial 5G contracts signed.
In addition, Nokia holds over 3,000 patents related to 5G technology, including many that relate to smartphones. Once the rush to implement 5G networks dies down, Nokia will continue to collect royalties from those patents, including an estimated $3.50 per 5G smartphone that’s sold.
Nokia stock has dropped dramatically since the days when it was the global smartphone leader (it’s down nearly 90% since 2007). However, 5G is expected to propel NOK back into growth territory starting in 2020.
Ericsson — along with China’s Huawei — is the primary competition for Nokia when it comes to 5G network construction. The Swedish telecommunications company currently claims 57 commercial 5G contracts, but with 55 live 5G networks. Ericsson has an advantage in Fixed Wireless Access (FWA), technology which would be used to provide 5G connectivity for homes and businesses.
Ericsson also holds 5G patents and expects to collect $5 in royalties from manufacturers that sell 5G smartphones. ERIC stock is already catching the 5G wave. It’s up 33% so far in 2020.
Broadcom is a chip supplier that’s set to benefit from both telecom rollout of 5G infrastructure and consumer adoption of 5G smartphones.
Early in its 5G network rollout, Nokia chose to use Field Programmable Gate Array (FPGA) chips for its equipment. However, that strategy proved to be expensive and subject to supply limitations. In June, Nokia announced it was switching to a custom System on a Chip (SOC) design from Broadcom. Nokia is targeting having 35% of its 5G shipments equipped with the custom chips by the end of 2020, and 100% by the end of 2022.
That’s nothing but upside for 5G stocks like AVGO.
On the consumer side, the slowing of smartphone sales over the past few years has been a concern for suppliers like Broadcom. However, 5G smartphones are expected to spur upgrades and boost sales. That will pay off for AVGO. For example, earlier this year, Broadcom signed a deal to sell Apple $15 billion worth of wireless components for new iPhones over the next three years.
As 2019 wound down, T-Mobile made news by being the first carrier to deploy 5G wireless nationally. In July — its merger with Sprint a done deal — T-Mobile announced its 5G wireless service was available in 20 times more cities than rivals AT&T (NYSE:T) and Verizon combined.
As it continues to pound home the message that it has “the world’s best 5G network,” T-Mobile is aiming to leverage that into more subscribers.
In addition to the boost to TMUS stock that more subscribers would offer, the company is also actively pursuing 5G services to replace broadband internet access for residential customers. This would open a new market for the company, disrupting the lucrative cable broadband market that’s currently dominated by big players like Comcast (NASDAQ:CMCSA). The company hopes to have 9.5 million 5G broadband customers by 2024.
While T-Mobile is making noise about its 5G firsts, Verizon has a big opportunity to fight back on the “best 5G” network front. T-Mobile has managed such rapid coverage because it is currently using low-band spectrum that has largely been repurposed from its 4G network.
Verizon, on the other hand, is the only U.S. carrier exclusively building out its network using the mmWave spectrum. While both are 5G, the difference in speed is dramatic. In testing by Opensignal, T-Mobile’s 5G network averaged a download speed of 47 Mbps, while Verizon’s was the world’s fastest at 506.1 Mbps.
Verizon has the opportunity to push its 5G networks as the fastest in the world, locking up urban customers and selling them the 5G smartphones that will take advantage of those blazing speeds.
On the surface, Nvidia may not seem like an obvious 5G stocks play. But the company’s powerful GPUs that are used for powerful, parallel-processing servers, position it nicely to take full advantage of the benefits of 5G adoption.
5G cellular networks promise to be 10 times faster than existing 4G networks. That means mobile applications will have the ability to transmit far more data. This could be anything from the graphics on mobile games, to information processed in real time for augmented reality applications, to data transmitted to and from self-driving cars. All of these applications require immense computing power, and that means Nvidia’s GPUs will be in demand.
Nvidia GPUs are also being used directly as part of 5G network deployment. Ericsson is harnessing the company’s GPU-accelerated EGX hardware to optimize the performance of its 5G networks, allowing more devices to share the bandwidth.
NVDA stock has been on fire for the past five years, posting over 2,100% growth, but the 5G era could help to propel it to new heights.
Apple is one of the best-performing tech stocks of the past decade. It was the world’s first trillion dollar company, and with a market capitalization of $1.8 trillion, $2 trillion is in sight.
5G could be what gets it there.
While the company’s other divisions like Services have done an admirable job of making up the revenue, iPhone sales have been down over the past few years. The smartphone market is becoming saturated, and existing iPhone owners haven’t had a compelling reason to upgrade. Many analysts think 5G will be that catalyst. This year’s iPhone 12 will be the first Apple smartphone to feature 5G connectivity and that is expected to kick off an upgrade super cycle.
In June, Wedbush estimated that up to 350 million existing iPhones could be traded in for 5G versions. Numbers like that would be a huge boost to AAPL stock.
In addition, Apple could well be the company that comes up with 5G’s “killer app.” In particular, augmented reality (AR) glasses that overlay real-life views with animated images or identifying information would benefit tremendously from the low latency and high bandwidth of 5G. Apple has been known to be working on AR glasses for years, and they have the potential to become its next new must-have product.
The final position on this list of 5G stocks is held by Qualcomm. This chipmaker is set to benefit immensely as blazing-fast 5G networks convince consumers to buy new smartphones. Qualcomm’s 5G-enabled Snapdragon mobile processors power most flagship Android smartphones. In 2019 — after years of legal battles — Qualcomm won the contract to supply Apple’s iPhone with 5G modems for the next six years. In other words, when someone buys a new 5G-capable smartphone, there’s a good chance QCOM will be collecting a fee.
Qualcomm also stands to benefit from a new generation of connected devices expected to take advantage of 5G. They’ll need 5G modems, and Qualcomm has solutions. To help this market for IoT (Internet of Things) to develop and expand, last October the company launched a $200 million 5G Investment Fund.
5G is looking like a wireless connectivity game changer. And the more devices that connect, the better the outlook for 5G stocks like QCOM.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.