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Investing in 5G Stocks

Updated: May 7, 2021, 6:49 p.m.

National 5G networks went online in 2020, but this massive technology rollout will for years encompass wide swathes of the global economy -- from small tech and infrastructure companies making 5G equipment and small-cell radios to the actual mobile network providers delivering 5G service. Along the way, consumers will need to upgrade to smartphones and other devices that can actually connect to the 5G networks. The 5G upgrade cycle has begun and is worth investors’ attention.

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The top 5G stocks to buy in 2021

5G is the fifth generation of wireless networking technology. It offers lower latency (the time between an input or request for data and the network’s response), along with download speeds up to 100 times faster than those associated with 4G. While mobile network providers such as T-Mobile (NASDAQ:TMUS) and rivals Verizon (NYSE:VZ) and AT&T (NYSE:T) are all great options for investing in the 5G movement, investors wishing for more concentrated portfolio exposure to 5G can focus on companies providing related infrastructure, equipment, and technology.

Semiconductor manufacturers (also known as chipmakers), manufacturers of core equipment and infrastructure, and holders of real estate assets are all well-positioned to benefit from the proliferation of 5G. Several exchange-traded funds (ETFs) also focus on parts or all of the 5G ecosystem.

Semiconductors

Equipment and infrastructure

Real Estate

ETFs

5g Chipmakers

As with all tech, the basic building blocks for 5G are semiconductors -- the computer chips that process data and execute commands. These companies provide the chips that make 5G work:

1. Qualcomm

Qualcomm's (NASDAQ:QCOM) product portfolio includes chips that enable 5G technology in everything from Internet of Things (IoT) devices such as industrial equipment to smartphones, cars, and modems and other equipment that make up the 5G network itself.

Qualcomm has profited from the smartphone boom since the early 2000s, focusing on the tech behind 3G and then 4G mobile networks. The smartphone industry has matured, and unit sales no longer reliably post double-digit percentage growth; however, the 5G upgrade cycle still is likely to significantly benefit Qualcomm. The company has ample cash on its balance sheet to drive further innovation in hardware, and it has consistently paid a dividend for nearly two decades.

2. Skyworks Solutions

Skyworks Solutions (NASDAQ:SWKS) sells some of the basic components that power 5G networks. As a smartphone and consumer electronics supplier, the company is using its connectivity know-how to successfully enter other sectors, including smart-home devices, connected industrial equipment, and medical devices. Although it’s the smallest chipmaker on this list, Skyworks has a healthy balance sheet, which supports its continued growth as 5G continues to become available.

3. Advanced Micro Devices

AMD (NASDAQ:AMD) makes the list because of its acquisition of Xilinx (NASDAQ:XLNX) -- the industry leader in field-programmable gate array (FPGA) chips. FPGA chips have flexible designs customers can reprogram and reconfigure even after they’ve been built. As new hardware is developed for 5G, FPGA chips’ adaptability makes them ideal for constructing the basic equipment to deploy 5G technology. Xilinx gives AMD access to a best-in-class research and development department and is also likely to improve AMD’s profitability since Xilinx’s profit margins are far higher than those of AMD’s traditional semiconductor chips.

4. NVIDIA

NVIDIA's (NASDAQ:NVDA) graphics processing units (GPUs) are most commonly used in high-end video games, but they are also being used for many other applications, 5G included.

Since 5G networks enable not only faster download speeds but also have the ability to handle higher traffic and intelligently route network signals where they’re needed most, high-end GPUs are required for this task. NVIDIA's GPUs are being used by telecom companies and equipment makers, and 5G deployment is likely to increase the need for GPUs to operate cloud-based video games that are streamed over telecom networks. Already a huge enterprise, NVIDIA is finding a potentially massive new market in 5G and has a history of making technological advancements.

View overlooking a large city that is lit up with a network of 5G ping points

Image source: Getty Images

Equipment and infrastructure stocks

Beyond the basic chips needed to power 5G telecommunications, general equipment makers provide the necessary hardware. To reach businesses and consumers, wireless 5G signals need extensive hardware to make the technology work.

1. Corning

Before it gets turned into a high-speed Wi-Fi signal, 5G data needs to travel along the wired portion of the internet, just like other electronic data. That’s where fiber-optic cable comes in, and Corning (NYSE:GLW) -- the legacy glass and ceramics manufacturer -- is a top provider of it. Even as they deploy new radio towers, many telecoms providing 5G service also need to add more high-speed cable to their back-end networks, and Corning is a top supplier for many of those companies. The company is also getting into a core component of 5G systems, the small-cell antenna space, by partnering with Qualcomm to supply in-building network equipment. And, Corning is helping to solve some of the problems 5G signals have in penetrating solid surfaces.

Corning is a solid investment, boosted by its long history of paying dividends.

2. Ciena

Small but steadily growing Ciena (NYSE:CIEN) sells fiber-optic equipment and design services to communications companies. Thus far, Ciena's profits from the expansion of 5G technology have enabled the company to pay down debt and increase its cash reserves. As organizations update their systems to handle 5G, this company is capable of providing both the engineering design and materials needed.

3. Arista Networks

Data center and internet infrastructure company Arista Networks (NYSE:ANET) is another often-overlooked 5G stock. Because 5G can carry massive amounts of data -- enabling ultra-high-definition video streaming or communications for network-connected vehicles -- data centers will play an increasingly important role in digital information systems. Arista is a top equipment provider for data centers, with open-source hardware and software-defined management and cybersecurity tools. Arista is also well-positioned to benefit from the accompanying boom in mobile 5G data.

Real estate and 5g

5G requires real estate. Towers and other fixed assets are needed to broadcast 5G signals, and the real estate investment trusts (REITs) American Tower (NYSE:AMT), Crown Castle (NYSE:CCI), and Digital Realty Trust (NYSE:DLR) are the largest landholders in the sector. American Tower and Crown Castle own and operate buildings and cell tower sites that are crucial to the function of both mobile networks and internet infrastructure at large. These real estate companies also establish fiber-optic networks that connect 5G small-cell sites to the rest of the internet. As for Digital Realty Trust, it’s a top developer and acquirer of data centers, and among its clients are telecommunications companies that are building the physical assets needed to make 5G possible.

Although these investments are primarily designed to generate income, all three REITs have seen their share prices grow significantly over time. As mobility becomes increasingly important around the globe, and data volumes continue to boom, the communications real estate assets in which American Tower, Crown Castle, and Digital Realty Trust specialize will only become more in demand.

Related topics

Invest in 5G for the long term

While previous telecom network upgrades enabled the smartphone and mobility booms, 5G technology is making every device more mobile and further entrenching digital technology in everyday life. Investors who are patient throughout the lengthy course of 5G’s deployment are likely to see attractive, long-term returns.

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