Examining the 5G opportunity

The Fool’s recent 5G marketing blitz has me really trying to suss out the opportunity here.

I recently came across Beth Kindig’s article, “8 predictions for tech stocks in 2020.” I know a lot of people here are fans of her and her newsletter. She has some very interesting things to say about 5G. I’ve pasted an excerpt below. https://www.forbes.com/sites/bethkindig/2020/01/16/8-predict…

1. 5G is a business to business growth story; the consumer story is overblown
Investors who believe 5G will drive a “supercycle” for Apple are not taking into consideration that 5G is a replacement cycle for 4G. The consumer opportunity will not be as significant as previous generations, such as when 4G delivered mobile broadband with smartphones being the primary beneficiary.

Apple’s revenue declined 2% year-over-year and is nearly stagnant in forward estimates at 4% growth from fiscal 2018 for fiscal 2020. To put it simply, investors are paying 105% more for each dollar of Apple’s earnings as the fundamentals are flat with a decline of 7% in net income. Some of this hype is being driven by the highly speculative 5G release in September of 2020.

5G semiconductors can sell 50% more-dollar chip content per device versus the previous 4G generation, meanwhile, handsets are in all-out price war. In other words, the profits will be more substantial at the chip level than the handset level while average sales price (ASP) continues to erode.
There are many areas where 5G will create major gains for investors. See #2 below.

2. Diversified 5G Small Caps and 5G Suppliers will be 2020 Winners
5G is unique from previous wireless generations due to the required change in infrastructure. While previous generations delivered increased speeds and robust internet, 5G proposes a more advanced technology stack. A brief overview of infrastructure changes include:

Massive Multiple Input and Multiple Output (MIMO) – more antennas will be needed.
5G frequencies cannot penetrate glass and are up to 100 times worse at penetrating walls than 4G. Indoor 5G cellular is a major concern at this time.
Small cell sites are needed to avoid the interruptions and latency that base stations alone can cause.
Carriers have various strategies with low-band, mid-band and mmWave.
Microdata centers and the edge cloud will open up hundreds of thousands or even millions of data centers globally.
Orthogonal frequency domain multiplexing (ODFM) will need to condense channels into mmWave range.
5G allows for virtualization, which allows traffic to be software-defined and centrally located. This greatly reduces the need for power and cooling costs.

The best 5G stocks will come from companies that solve real issues related to 5G infrastructure and performance, or who supply a broad swath of the ecosystem. Triple-digit (and maybe quadruple-digit) returns in 5G will come from scarcely-known names.

So I’ve been trying to think of which companies are going to be able to benefit most. Kindig seems to indicate that semiconductor manufacturers are going to be better bets than consumer brands (namely Apple). This has me looking at Broadcom, Qualcomm, Skyworks, and Quorvo. Broadcom looks particularly attractive because of its 4.07% dividend yield. It could easily see its multiple expand if it catches some tailwinds. But this is more of a value play and we are looking for growth. These chip companies are set to benefit from a big new cycle, but in the end their business models do not compare to the SaaS companies we like to follow. We all know the drawbacks to selling chips.

What is more interesting to me is the idea of proliferation of micro-datacenters. Who will this benefit, besides the obvious, American Tower and Crown Castle.

The three companies that pop into my head that have been examined on this board are DataDog, Nutanix, and Pure Storage.

This is not an in depth analysis, but DataDog’s specialty is infrastructure monitoring, and this looks like a whole lot of infrastructure that will need to be monitored. This makes me confident that Datadog will be able to sustain its growth rate for a long time, as the explosion in infrastructure will open up a world of greenfield opportunities for them.

Pure Storage and Nutanix seem like possible turnaround plays. Here is Pure Storage’s CEO talking about their 5G opportunity: https://www.cnbc.com/video/2019/06/28/5g-is-entirely-an-oppo…

In short, 5G means an explosion of Data, an explosion of data, to my simple mind, requires an explosion of storage. That’s where pure storage comes in.

An explosion in data centers means an explosion in network complexity. Tools that make that complexity manageable become very valuable. That’s Nutanix. Maybe VMWare is the better bet. I still need to look into it.

Anyways, 5G is coming, and it seems like money is going to be made in ways that might be surprising for many. I’d like to open a discussion that might make things not so much of a surprise for us. These are my layman’s musings. What are your thoughts?


I agree this is much less of a consumer thing (sorry Apple, sorry Verizon) and much more of an industrial thing. 5G and Internet of Things will go hand in hand. Think factory and warehouse automation, as just one single example. Internal private 5G networks will displace WiFi for these purposes. I know people here don’t dig hardware, but people, software MUST have hardware to run on, and more running software requires more hardware. Further, for this in particular, 5G requires new hardware to be designed, sold, and deployed.

You touch on several of the companies I’d be watching in this space. AMT, CCI, AVGO, QCOM, SWKS. Since this requires chip design I’d watch SNPS as well. My own employer (ARM) is pushing hard into IoT, but we’re not publicly traded. As far as storage goes, that depends entirely on the lifespan of all this data – how long will it be retained? Will vary. I am also fully expecting to see some new names, new companies, spring up over the next 24 months because of this.

This is definitely early stages but the growth potential is indeed large.


I read the same article a week ago. It inspired me to do some more research online. I found a helpful article on SA that talks about 5g and specific 5g stocks:


I bought some starter positions in CHL and CWRF for the following reasons: 1) both are beaten up 2) China is the first to roll out 5G 3) they have the most customers. These companies have a large percentage of government ownership, so that is the biggest risk I see so far.

I’d like to buy 5g American stocks. However, I’m waiting for the right time to buy. In my opinion, they seem richly overvalued. Or at least they’ve run up allot in the short term and I’d hate to buy in at the top.