The new technology is expected to shift the way we connect, orbiting outside the current limitations and a number of stocks are set to take off.
Aug. 31, 2020
We are stepping into a new world of technology, with the 5G network set to change the way we communicate forever, boasting faster data transfer times and download speeds up to 100 times quicker than its predecessor, 4G. While only in the early stages of rollout, these companies are the frontrunners who will benefit from 5G.
Nvidia
Nvidia is known for creating some of the best-in-class graphics processing units while its hardware is found inside the early Sony Playstation and Microsoft Xbox consoles. This GPU technology is already being used by telecoms and equipment makers and could benefit hugely when 5G is launched amongst consumer products. It has the potential to lead consumers into a space of virtual reality that we have never seen before.
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Nvidia has a strong bull case, recording better than expected revenue of $3.86 billion in the second quarter. This is about 6% more than what analysts predicted and was backed by the company’s data center unit profits. For the quarter, the segment generated $1.75 billion, overtaking it’s gaming revenue for the first time, which came in at $1.65 billion.
However, there are some logistical concerns when it comes to the roll out of 5G
for Nvidia — it’s likely to be costly due to the laying out of fiber lines that will be needed for cell towers. This could lead to reduced latency and increased bandwidth. Although, looking ahead to Nvidia’s revenue, it is set to continue to grow, with analysts predicting a 40% rise in net revenue to $10 billion in 2024.
Ciena
Ciena (NYSE: CIEN) controls almost a quarter of the optical network hardware market and continues to increase its share. The telecommunications company was the first to launch an 800 gig system to the market and will undoubtedly benefit from the predicted demand for the 5G network.
The company also has expert experience in fiber optics and software-defined networking capabilities, making for a bull case. As for revenue, Ciena posted $894.1 million in the second quarter– a 3.4% increase year-over-year. Also, the growing use of sanctions against Chinese giant Huawei could open up global opportunities for Ciena.
The telecommunications business is in a great position heading into the future, with its stock up more than 40% this year. Ciena also has strong cash on hand of $989 billion. It is likely to continue posting steady growth and its large market share in the optical network puts Ciena in a strong position.
American Tower
With the rush towards the launch of the 5G network, American Tower (NYSE: AMT) faces a huge building opportunity with the new network requiring cell towers to be closer together. American Tower already reported 7.5% organic U.S. tenant billing growth in its second quarter.
88% of domestic customers are made up by the likes of AT&T, Verizon Wireless, Sprint, and T-Mobile. These big names fueled a 2.4% jump in property revenue for the quarter to $1.9 billion compared to the same time last year. American Towers is expected to be in high demand for 5G base stations and will likely secure more long-term contracts, leading to strong growth rates over the next few years.
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