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5G Revolution Starts Next Year: This Stock Will Double as a Result

5g (fifth generation) sign related to mobile communications.
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Tuesday, 16 October 2018 12:03 PM Current | Bio | Archive

A new tech boom begins next year.

Remember when you couldn’t watch videos on your phone because the internet was so slow?

New infrastructure for cell phones called “4G” solved that problem.

Most smartphones run on the 4G cell network today. But getting it up and running wasn’t cheap.

Around 200,000 cell towers were built to broadcast the 4G signal that blankets most of America today. The cost of building out the 4G network hit $200 billion in 2015.

A big winner from this spending spree was cell tower operator American Tower Corp (AMT).

The chart below shows the performance of AMT from 2011, when the 4G buildout started.

As you can see, it has soared 185%:

4G Was Huge, but Here’s a Much Bigger Investment Opportunity

It’s a $500 billion project called 5G, or Fifth Generation Wireless Technology.

4G required around 200,000 new cell towers.

AT&T says 5G will need another 300,000.

And that’s only the start.

No phone, computer, or modem on the market today is 5G “ready.” Which means everything needs an upgrade.

In RiskHedge Report, I told my subscribers about the company that has a near monopoly on 5G chips and antennas.

The world’s biggest network providers and device makers like T-Mobile, Verizon, and Apple are already scrambling to secure access to its products so they can participate in the 5G revolution.

I’ll reveal it here in a moment.

But before that, let me give you some context on the 5G technology—and why this company will play a key role in the 5G revolution.

5G Will Require the Biggest Revamp of America’s Wireless Networks Ever

A 5G signal is extremely fragile. Moving cars can interfere with it. Even leaves blowing around on a tree can interfere with it.

And a 5G signal can only reach 1 kilometer… or about 4 city blocks. Compare that to a 4G signal, which can reach up to 70 kilometers.

4G required tall cell towers to blast signals over long distances. 5G will need hundreds of thousands of smaller towers.

These small towers are about the size of a trash can… and soon there will be one on almost every street corner.

5G will also run on a new frequency that’s never been used before.

This is very important.

It means every phone and computer will need new antennas and chips to connect to 5G. In other words, we will throw away our phones and buy new ones to get on 5G.

This is why the GSM Association, which represents 800 of the world’s largest mobile operators, says companies will have to spend $500 billion in the next two years to get 5G ready.

Tens of Billions of Dollars Will Flow into Chipmaker Qualcomm Inc. (QCOM)

Not many people know this, but Qualcomm owns the cell phone service known as CDMA.

It’s the technology that underpins wireless networks. It allows your phone to send and receive data. If you’re a customer of Sprint, Verizon, or Virgin Mobile, your phone runs on it.

Around 75% of Qualcomm’s profits come from its near monopoly on both 3G and 4G network patents.

With a portfolio of more than 130,000 patents, Qualcomm can charge device makers like Apple and Samsung a licensing fee of up to 5% of the price of each phone they sell.

Qualcomm collected $6.44 billion through its licensing segment last year. This business is ultra-profitable, as its 85% operating margin shows.

Qualcomm holds 15% of the patents for 5G—the most of any company in the world. Which means it will charge many device makers a fee of 3%–5% on the price of each 5G device sold.

You see, Qualcomm is the world’s largest “System on Chip” (SoC) maker with a 42% market share. Its closest rival, Apple (APPL), has only 22% of the market.

A SoC is a microchip that has all the components required to power a phone.

Central processing units (CPUs) sold by the likes of Intel (INTC) and AMD (AMD) can’t run a computer or phone on their own. But Qualcomm’s SoC integrates all the components needed to run a device onto single chip.

It’s been a tough four years for this segment. Sales have slipped 15% since peaking in 2014.

That’s because Apple and Samsung stopped using Qualcomm’s chips in many of their phones.

But the launch of 5G will change all this…

Qualcomm Will Double in the Next 3–5 Years

When the world switched from 3G to 4G between 2010 and 2013, Qualcomm’s sales soared 126%.

I expect the same to happen when we move to 5G. Here’s why.

Today, Qualcomm is the only company making 5G modems and antennas in America.

As I mentioned, current phone antennas can’t connect to 5G’s high frequency signal. Which means all new devices will have to be fitted with new antennas.

Twenty wireless providers are already planning to use Qualcomm’s chips and antennas in their 5G trials. Those include AT&T, Verizon, and Sprint.

And device makers like Sony, LG, and HTC plan to use them in their 5G products.

The first 5G networks and devices will launch next year. Since Qualcomm is the only company that develops 5G chips and antennas, tens billions of dollars are set to flow its way.

I’m buying QCOM here, and I expect it to at least double as 5G rolls out across America in the next 3–5 years.

Keep in mind its stock has soared quite a bit since April… so it can easily take a breather here before it marches higher.

The 5G Revolution Will Bring More Once-in-a-Lifetime Investment Opportunities

5G is what I call a core disruption. (You can read about the other disruptions I wrote in my archive here.)

Its nearly real-time speeds will drive world-changing tech like self-driving cars and remote surgery.

5G is truly going to be one of the most disruptive trends we’ve seen since the late 1990s.

Stephen McBride is the editor of the RiskHedge Report, a popular and rapidly growing advisory dedicated to helping investors understand and profit from disruption.
 

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StephenMcBride
5G is truly going to be one of the most disruptive trends we’ve seen since the late 1990s.
5g, tech, boom, stock, shares
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2018-03-16
Tuesday, 16 October 2018 12:03 PM
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