By now, you’ve likely heard the term “5G wireless” a number of times. Telephone carrier ads everywhere tout the superiority of their 5G network. In fact, you may have already upgraded to a 5G smartphone but may not notice the difference. Your 5G phone may still operate on a 4G network since your geographical area may not yet support 5G.
However, by 2025, 5G will cover two-thirds of the world, according to Ericsson. We are still in the rollout phase of the 5G revolution — operators have started adding capacity again at a higher rate. The tech stocks bear market plunge means opportunities still exist for those interested in investing in 5G stocks.
By the time you’re finished with this article, you’ll walk away with a better understanding of the 5G industry and key 5G stocks to invest in.
Why Invest in 5G?
The reason to invest in anything is to reap profits from the potential upside. We’re still in the early innings of mainstream 5G penetration — its coverage only reached 25% of the population by the end of 2021. Now, nearly 60% of new smartphones are 5G-enabled.
Mass market adoption should happen by 2025, when 5G will cover two-thirds of the world, according to Ericsson. 5G offers a platform for innovation and efficiency, enhances current applications and opens up the doorway to a multitude of new technologies and applications.
Qualcomm estimates 5G will enable up to $13.1 trillion in global sales activity by 2035. The initial 5G hype has seen its peak and collapse. The pandemic sped up e-commerce and wireless broadband usage by years to accelerate the move toward mass 5G and to handle capacity. We are now in the adoption and immersion stage, where consumers and businesses can gain access to and use 5G.
A resurgence in 5G interest and investment has inflated despite the current uncertain economic environment.
Ways to Invest in 5G
You can consider three areas of investment in 5G: infrastructure, hardware and service providers. Improved applications are the indirect benefactors of 5G. For example, Apple’s iPhone 14 has 5G capabilities but an investment in Apple Inc. (NASDAQ: AAPL) isn’t a direct investment in 5G.
5G stocks are down in 2022 due to the downward trend in the U.S. equity markets. Is this a glass half-full scenario? Possibly, since a larger drop in the share price can offer a larger annual dividend yield and more upside potential when the stock market recovers.
Infrastructure
Investing in infrastructure entails investing in the companies that build, upgrade and service the networks that operate 5G. Service providers can band-aid capacity by upgrading existing 4G networks while building out its radio access network (RAN) towers and small-cell base stations needed for true standalone 5G. Infrastructure also involves bidding for higher spectrum bands in auctions.
Hardware
Investing in hardware means investing in the companies that provide key components to build the equipment needed to enable, operate and use 5G. You can invest in the companies that make the mobile semiconductors or wireless chipsets needed for consumers to use 5G service, which can range switch providers, routers and optical fibers to the various semiconductor companies that handle that supply the processors for 5G usage.
Service Providers
Service providers provide 5G service for customers. They are telecommunication and broadband wireless providers who actually operate the networks. The companies may own or lease the actual network towers but provide the access to use 5G service and enable consumers and businesses to operate 5G-enabled devices.
Top Companies Involved in 5G
You may recognize some or all of the companies involved in multiple areas of broadband, information technology and cellular networks on this list. When investing, consider the other complementary products and services these top companies provide and do your research on their latest earnings reports and financial metrics. These companies cover the areas of investment that include infrastructure, semiconductors and service providers. Let’s take a look at six of the best 5G stocks to invest in.
Telefonaktiebolaget LM Ericsson
Stockholm-based Telefonaktiebolaget LM Ericsson (NASDAQ: ERIC) is a multinational network telecommunications company that provides infrastructure and networking services in over 180 countries worldwide. It has grown a portfolio of more than 40,000 patents. The company made a major pivot in its business from selling cheap cellphone handsets to leading the network transformation trends. Its 5G intellectual property (IP) portfolio helps it provide an end-to-end 5G network buildout solution by upgrading existing networks.
Ericsson has contracts with the largest telecom providers in the world, from a $3.5 billion deal with T-Mobile US (NASDAQ: TMUS) to Verizon Communications Inc. (NYSE: VZ) choosing the company in 2017 for its fixed 5G network rollout. Ericsson also built 65% of the AT&T 4G mobile network.
The company has grown its RAN market share from 33% in 2017 to 39% in Q3 2022 and signed “significant” contracts with further increased geographic footprints in its Q3 2022 earnings.
Nokia Oyj
Finland-based Nokia Oyj (NYSE: NOK) provides products and services for RAN, covering 2G to 5G technologies. The company has benefited from the strong U.S. dollar versus the euro as it generates much of its income in dollars while expenses are denominated in euros.
The company continues to invest in 5G infrastructure; operators continue to add capacity at a higher rate. Notable wins include a contract for 45% of India-based Bharti Airtel’s planned 5G network and selection by India's largest mobile carrier, Reliance Jio, as its 5G equipment provider. NOK tends to draw more interest when shares fall under $5.
Qualcomm
Qualcomm (NASDAQ: QCOM) supplies the Snapdragon series CPU chips for 3G to 5G smartphones from Samsung, Apple, Lenovo, Vivo, Motorola, Xiaomi, OnePlus, Oppo and Android devices. It was the pioneer of CDMA technology in the 3G era. Its chips are also used in modems, cars and wearable devices.
The Qualcomm Snapdragon X65 was the world’s first 10 Gigabit 5G and first 3GPP Release 16 modem-to-modem antenna solution. It was designed to extend 5G in mobile broadband, fixed wireless, industrial IoT and 5G private networks.
Skyworks Solutions
Skyworks Solutions (NASDAQ: SWKS) provides analog semiconductors optimized for next-gen 5G wireless infrastructure applications. It supplies chips for front-end modules and radio frequency systems. It is Apple’s 5G iPhone RF front supplier.
Smartphone sales have slumped Skyworks’ stock price but 5G tailwinds could boost up due to capacity and content growth. It also has the potential for growth in China’s electric vehicle (EV) market as it supplies RF expertise to MediaTek platforms as 5G connectivity gets adopted.
T-Mobile US
T-Mobile US (NASDAQ: TMUS) is the nation’s fourth-largest wireless carrier. T-Mobile has the most reliable 5G network with the fastest 5G speeds and best 5G coverage, according to a report by umlaut. T-Mobile uses 600 MHz signals that travel further and provides more 5G coverage than its competitors.
In 2022, the company planned to add 6.3 million net customer additions for full-year 2022, overshadowing Verizon’s 12,000 additional customers and AT&T’s 813,000 additional customers.
Verizon Communications
Verizon Communications (NYSE: VZ) is the nation’s second largest wireless operator. Its 5G nationwide mobile network is available in over 2,700 cities as it continues to expand its network. Its 5G ultra-wideband network uses high band (mmWave) and mid-band (C-band) spectrum with speeds up to 10x faster than its nationwide network. Verizon deploys both technologies alongside its 4G LTE. 5G phones that step out of the coverage area automatically shift to 4G LTE mode.
AT&T
AT&T (NYSE: T) is the nation’s largest wireless provider with 44.8% of the country’s wireless subscriptions and telecommunications, media and technical services worldwide.
It offers a range of devices and service plans and leads the switch to 5G. Its 5G service comes in three tiers that unlock the full potential of the technology. The base AT&T 5G uses the low band for wider coverage and can reach 281 million people in 22,000 cities. The high-end 5G+ uses millimeter wavelength and reaches 45 major metropolitan areas, stadiums and other high-traffic areas. The 5G+ with C-band offers high speed and wide coverage.
Pros and Cons of Investing in 5G
Investing in 5G does come with both pros and cons you should consider before you invest. These considerations range from new technologies to the impacts of underlying economic climates and consumer sentiment.
Pros of Investing in 5G
What are the benefits of investing in 5G? Let’s take a look:
- Affordability: 5G stocks are more affordable due to the technology bear market.
- Diversified: 5G stocks are also involved in complementary products and services so investors are somewhat diversified.
- Artificial intelligence (AI) applications: AI applications will become more efficient as 5G makes it possible to collect more robust data in real time to enable device-to-device (D2D) and machine to machine (M2M) communications.
- Efficiency: 5G is an enabling technology that will make data-heavy and mission-critical applications more efficient and mainstream from precision farming (agriculture technology) to smart cities and autonomous vehicles.
Cons of Investing in 5G
Investing in 5G includes the following downsides:
- Risky in weak economies: 5G investing can be risky in recessions and weak economic climates as companies cut capital expenditures and consumers cut down on expenses like upgrading to a 5G-enable smartphone or 5G wireless plan. Uncertain economic climates can also result in slower 5G infrastructure spending, buildout and adoption.
- Expensive to build: Financing 5G infrastructure buildout can be prohibitively more expensive with rising interest rates
- Exports: A strong U.S. dollar can hurt 5G companies that export products overseas.
Will You Benefit from 5G?
While investing in 5G is not a new topic (kind of like learning about FAANG stocks — it’s not a new concept), it has regained traction as 5G stocks trade at historic lows. This provides for more upside in a recovery and in many cases, an outsized dividend. The global adoption of 5G is not a matter of if, but when. We’re still in the early innings of the 5G revolution, so consider whether 5G deserves a place in your portfolio.
