Editor’s Note: Longtime Diary readers know our usual beat is money, not technology. But sometimes, the two worlds come together. And we can’t afford to ignore it…
Now is one of those times. Bill’s go-to tech expert, Jeff Brown, has a megatrend on his radar – the boom in fifth-generation (5G) wireless technology. Jeff calls 5G the most important tech trend over the next decade. And he believes it could hand folks 10 times their money on a few key investments.
In this special edition of the Diary, Jeff shows you why… and how you can position yourself to profit…
The United States and China are locked in a winner-take-all economic struggle.
And no, I’m not talking about the ongoing trade negotiations. It’s something else.
Whoever wins will be the economic powerhouse of the next decade. The stakes are that high.
Let me show you what I mean…
Hostile Takeover
Last year, we almost saw a merger between technology firms Broadcom and Qualcomm. Had it gone through, it would have been the largest tech deal to date.
Broadcom had been pursuing Qualcomm since November 2017. It initially offered an unsolicited bid of $103 billion to acquire a controlling interest of Qualcomm.
Qualcomm resisted. So Broadcom took another route.
It initiated a hostile takeover of Qualcomm. That’s when an acquiring company attempts to bypass its target’s board and purchases a controlling interest in the company directly from shareholders. Very often, this means offering to buy shares at a premium.
At $117 billion, the new bid for Qualcomm would have represented the largest technology merger in history.
But then the White House stepped in… President Trump blocked the merger.
The president said that “credible evidence” suggested that the takeover would pose a risk to U.S. national security.
The official details are classified. But I believe I know why the White House took this unprecedented step.
At the heart of the president’s decision to block the merger is fifth-generation (5G) wireless technology.
And here’s why that’s important…
The Coming Wave of 5G
When you connect to the internet on your computer, smartphone, or smart TV, a vast physical communications infrastructure makes that connection possible.
And over the years, our wireless networks – and the infrastructure that supports them – have evolved.
It all started in the 1980s with first-generation (1G) networks. Compared to what’s possible today, 1G didn’t allow much.
You could only place voice calls… There was no layer for carrying other types of data. And you had to use one of those brick-sized cell phones Gordon Gekko yaps into in the movie Wall Street.
But from then on, a new network generation went live roughly every 10 years. Each provided faster download speeds and more applications. The most recent one, 4G, went live around 2011.
Now we’re shifting to the fifth generation of wireless networks – 5G. And it represents the largest leap in wireless technology to date.
Largest Leap Forward
The current 4G networks are a disappointment.
The developers that built the 4G network thought it would deliver average download speeds of 100 megabits per second (Mbps). But in reality, many people see much lower speeds.
[Megabits per second, or Mbps, is a common measurement for internet connection and download speeds. For example, to stream a high-definition video from Netflix, you need a download speed of at least five Mbps.]
At the time of writing, the U.S. has an average download speed of about 16 Mbps with LTE connections. According to a 2018 OpenSignal report, we’re in 62nd place, behind Romania (at 28 Mbps) and Finland (at 26.6 Mbps). Even Dracula and the reindeers have internet speeds faster than most Americans.
But with 5G, the peak speed jumps to 10 gigabits per second (Gbps).
One gigabit is 1,000 megabits. So at peak speed, 5G will be 1,000 times faster than the average 4G connection we have today.
Even if we assume that average 5G speeds would be just 10% of their potential, we’re still looking at 1,000 Mbps. That means that average 5G speeds will be 100 times faster than what we have today.
With that kind of speed, you’ll be able to download a two-hour movie in 10 seconds. Dropped phone calls and slow-loading web pages will be a thing of the past.
Plus, some previously “sci-fi” tech will finally become a reality.
Technologies like self-driving cars, virtual reality, and holographic projection will all operate over high-speed 5G connections. The applications are endless.
5G is a game-changer because of all the technological innovation it will bring about.
It’ll be responsible for $12.3 trillion worth of new goods and services by 2035. That’s about 70% of America’s total GDP in 2018.
And here’s why the government considers the completion of 5G a matter of national security…
First-Mover Advantage
Countries that lead the way in deploying these networks will have a competitive economic advantage over other countries.
And the technology companies in these “first-mover” countries will be the first to develop the hardware and software enabling these 5G wireless services.
Right now, the government’s fear is that China will set the 5G precedent.
For context, Chinese company Huawei supplies the infrastructure and support for more than half of the 537 4G networks around the world.
Suspicions abounded for years about the company using its technology to spy on U.S. network traffic. And after 2018, tensions reached new highs.
This led to Huawei being banned for a time from the U.S. and several other Western markets over spying concerns.
The U.S. government sees it as an imperative that U.S. wireless networks are built out quickly – with U.S. and European technology – to ensure that the country’s networks are less likely to fall victim to foreign espionage.
That’s why the Trump administration blocked the Broadcom/Qualcomm merger.
While Broadcom recently stated its intention to bring most of its business back to the U.S., the bulk of its business is still based in Singapore. And while Singapore is its own country, it’s heavily controlled by Chinese Singaporeans.
The concern was that Broadcom would force Qualcomm to cut back on its research and development into 5G, letting Huawei fill the void and making U.S. wireless networks vulnerable to cyberspying.
This isn’t wild speculation, either.
The Committee on Foreign Investment in the United States is a government agency that oversees foreign investment in American companies. It officially recommended blocking the Broadcom/Qualcomm merger. And it specifically mentioned the threat Huawei posed in the 5G space.
The Trump administration even threatened to take things one step further…
Nationalized Infrastructure
In January 2018, leaked White House documents showed that the U.S. government was considering nationalizing the 5G network build-out.
In other words, it debated seizing control of wireless networks from AT&T, Verizon, and other service providers… and putting them in the hands of the government.
I had a hunch at the time that this was just a warning… a way to light a fire under the U.S. companies involved in the 5G build-out.
The Trump administration was saying, “Get out there and build these 5G networks quickly, or we’ll do it for you.”
And I was right. Trump has since said he opposes nationalizing the U.S. 5G network.
But sending a warning was a very smart move by the administration. And it worked.
Verizon and AT&T – along with T-Mobile and Sprint, which are in the process of merging – are already building out 5G networks in dozens of cities around the country.
The hope is to have the U.S. regain leadership in wireless network deployments, which will stimulate even stronger leadership in wireless network technology.
If the U.S. fails, the government fears that America would be dependent on Chinese technology to make use of 5G. That would give China an enormous amount of leverage over the U.S.
This is a race the United States must win at all costs…
If you want to set yourself up to profit from this trend, I recommend looking at companies that provide critical network infrastructure.
American Tower (AMT) is one such company. It builds and maintains communications infrastructure like cell towers.
It was instrumental in the 4G build-out that started in 2011. And it’s also heavily involved in erecting and maintaining the towers used in the 5G build-out.
Remember, 5G is expected to create more than $12 trillion in wealth. Whoever sets the 5G precedent will be the economic powerhouse for the foreseeable future… which is why investors should be paying attention.
Regards,
Jeff Brown
Chief Technology Analyst, Bonner & Partners
P.S. The 5G race is far from over… In fact, it’s just getting into full swing.
That’s why I’m hosting a free 5G investment summit today at 8 p.m. ET. I’ll show you why investing alongside the 5G rollout is a once-in-a-decade opportunity.
Key 5G stocks will 10X at least. I’ll reveal how I spot these winners. And I’ll even give you the name of my favorite 5G company on my watchlist. Reserve your spot here.