Here are six stocks benefiting from the 5G boom.
Back in the California gold rush of the mid-1800s, it’s thought that more people got rich by selling picks and shovels to miners than the few who made fortunes by hitting a gold seam. These days, pick-and-shovel investing means gaining exposure to hot trends by investing in companies that supply materials, equipment, services or technologies that support the companies producing the final output. When it comes to the 5G market, the network carriers are like the miners of yore, while those that supply them are like those selling the picks and shovels. You’ll want to consider both types of investing when thinking about the best 5G stocks to buy in 2022.
Verizon Communications Inc. (ticker: VZ)
Precedence Research estimates that the global 5G services market, which includes Verizon, could hit $1.87 trillion by 2030, up from $64.54 billion in 2021. The market for 5G services is growing amid demand for internet subscriptions, fast and extensive network coverage and the “internet of things”, notes Kunal Sawhney, CEO of equity research firm Kalkine Group. Verizon is the biggest wireless provider in the United States based on subscribers, and it’s been partnering with companies in different industries to bring its 5G technology into different markets, such as virtual reality. Earlier this year, Verizon committed to bringing 5G to more than 100 million people.
T-Mobile US Inc. (TMUS)
In late July, when T-Mobile reported quarterly results, its shares jumped even though the wireless carrier’s earnings came in short of analyst expectations. Investors cheered on the company, which bought major competitor Sprint in 2020, as it reported an addition of more customers that pay monthly than analysts were expecting. These “post-paid phone customers” are a key gauge of wireless company financial health, as they tend to be profitable and reliable. Plus, T-Mobile increased its guidance for several metrics.
AT&T Inc. (T)
For big mobile service providers, investors could also explore AT&T, notes Sawhney. In the second quarter, the company added more post-paid phone customers than T-Mobile did. CEO John Stankey said in a statement accompanying the results that the company is expanding its customers across 5G and fiber. It recently reached a target of covering 70 million people with mid-band 5G spectrum two quarters earlier than it had originally expected, and is now forecasting coverage of 100 million people by the end of the year. “The fifth generation of wireless technology is one of the technological areas that is expanding rapidly,” Sawhney says. “As a result, 5G attracts large numbers of investors.”
Broadcom Inc. (AVGO)
Now let’s turn to the pick-and-shovel sellers of the 5G industry. “Investors seeking a higher growth exposure to 5G can also concentrate on businesses that offer infrastructure, equipment and technology,” Sawhney says. “Companies that make semiconductors, mobile technology infrastructure and owners of real estate assets seem to be in a good position to profit from the spread of 5G.” One of those he says investors can consider exploring is Broadcom, which produces chips for smartphones. In its most recent quarterly report, the company said its net revenue increased by 23% to a record $8.1 billion. With those sales, its net income grew by more than $1 billion. Broadcom is expecting $8.4 billion in sales in the third quarter.
Nvidia Corp. (NVDA)
Known for its graphics processors, this chip-making powerhouse has been expanding in 5G through its AI-on-5G platform, a service that simplifies deployment of artificial intelligence applications over 5G networks. The company touts its Nvidia Aerial program, a network for building high-performance 5G applications. For its most recent quarter, the company reported a year-over-year revenue gain of 46%, although its net income fell 15%. “5G provides the underlying connectivity for billions of devices, extending the reach of AI algorithms and applications to all connected objects at the edge, enabling new use cases and new markets,” the company’s website says.
American Tower Corp. (AMT)
American Tower is a real estate investment trust that owns a portfolio of wireless communications towers. Towers are a critical and stable part of the wireless network infrastructure, which lends to the company’s long-term staying power. O’Hara likes the stock “because of the need for better coverage to enable the denser 5G packets to become relevant, and that means we need more towers and micro towers.” The company is well positioned to benefit from the broadband push in the national infrastructure expansion. With many towers in rural areas, the company seems primed to capitalize on the push to deliver broadband service in more remote areas.
7 best 5G stocks to buy now:
— Verizon Communications Inc. (VZ)
— T-Mobile US Inc. (TMUS)
— AT&T Inc. (T)
— Broadcom Inc. (AVGO)
— Nvidia Corp. (NVDA)
— American Tower Corp. (AMT)
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Update 08/03/22: This story was published at an earlier date and has been updated with new information.