Broker Check

The 5G Transition Will Bring Investment Opportunities

| July 15, 2019

Cornerstone Financial Services is in constant pursuit of investment opportunities, using data to inform decisions that we hope ultimately result in healthy capital gains.

And right now, our opinion is that the world may be at the edge of another inflection point of technological advancement – the move to 5G, the fifth generation of cellular networking technology, which will take place over the next decade or so.

To be clear, this post isn’t about winners and losers. Frankly, there will be both. Rather, we want to point out that this could be a significant global investment opportunity over time.

For example, the below chart shows projected 5G mobile subscriptions through 2024. There is clearly an upward trend, and if this holds true, the entire mobile ecosystem will be transformed in just five years.

What Exactly is 5G?

Without getting too technical, which is outside our expertise anyway, 5G is the expansion of usable cellular frequencies to deliver increased bandwidth, faster data movement (20x speed increase), and the ability to support more mobile devices.

The need for faster, more reliable networks has been driven mostly by the huge increase in smartphone usage. In fact, Cisco says by 2020 streaming video will account for 75 percent of all mobile traffic.

This network innovation could be impactful in several areas, including vehicle-to-vehicle communication, health care, robotics and manufacturing, to name just a few.

Some advancements we could see include improved robotic surgery tools, “lights out” manufacturing that uses autonomous machines around the clock, and a reliable ecosystem for the “internet of things.”

The “internet of things” could bring on:

And none of that is practical with the limitations of our current 4G networks.

What are the Keys to Making it Happen?

To make the transition to 5G successful, the infrastructure of our 4G networks must be upgraded. It’s been happening since 2010, with more than $250 billion spent on improvements and another $100 billion planned in 2020.

The critical precursor for that work is a favorable regulatory environment, which so far seems to be in place. The Federal Communications Commission (FCC) is pro-5G, holding auctions to free up spectrum for the transition through its FAST Plan. The plan also streamlines outdated policies to enable the transition.

Competition among firms is fierce, no doubt. As such, we expect this technology could be great for investors in the years ahead.

But that depends on one key thing – trade talks with China.

The 5G transition is a big part of the “trade” dispute with China because China plans to be 5G dominant worldwide. In the process, the country has run afoul of accepted business practices by engaging in intellectual property theft and the like, along with building secret backdoors in tech equipment.

Any way you slice it, this matters globally and will for some time. That’s music to the ears of prepared investors.

Securities sold through CoreCap Investments, Inc., a registered broker-dealer and member FINRA/SIPC; advisory services offered by CoreCap Advisors, Inc., a registered investment advisor. Cornerstone Financial and CoreCap are separate and unaffiliated entities.