Making the Connection: This Tech-Investing Theme Completes the Circuit

While we have several hundred companies yet to report, so far, the June 2021 quarter earnings season has served up a number of data points for my Digital Infrastructure and Connectivity investing theme. July had started with more talk of a return to normalcy, but the rise of the delta variant of COVID-19 has a growing list of companies pushing out expected dates for workers to return to the office. For example, Amazon now sees its workers returning on Jan. 3. These push-outs could once again task networks even as other companies like Alphabet , which has approved 85% of its reported 10,000 relocation and remote work requests, embrace work environments that rely heavily on the digital infrastructure. Combined with the unquenchable thirst for content and the expected explosion in the Internet of Things (IoT) market as 5G deployments mature, there will be no slowdown in the need to increase the density of existing networks as more devices are connected. There are several ways to invest in my Digital Infrastructure and Connectivity investing theme, which is why we created an index to reflect all of it. But if I had to narrow it down to a handful of companies to invest in, my pick of the bunch would include Skyworks , given the multiplier effect 5G will have on its content per smartphone even as the technology widens its total available market rather considerably. On the mobile networks side of things, I've been a fan of Nokia shares, not only because of the 5G lift it offers its infrastructure business, but also the extremely profitable upside potential with its IP licensing business. Recently Nokia inked two licensing deals with automotive companies, which tells us, yes, the car will soon be a data center on wheels and a driver of much, much data traffic. And that's before we see the advent of truly autonomous driving, an event that will skyrocket the amount of demand produced by cars and trucks. Here is a sampling of the confirming company commentaries we've received thus far: Ongoing demand for our capital equipment and APS solutions remains very strong and is supported with multiple long-term drivers... The end-applications driving significant capacity needs today include the worldwide adoption of connected devices, the growth of 5G infrastructure, and the next generation of computing power, driven by big data and artificial intelligence. The combination of these structural, technology transitions and broad-industry trends are significantly enhancing the demand for our products. - Kulicke and Soffa Industries , April 5 Worldwide sales of semiconductors in Q2 2021 were $133.6 billion, an increase of 29.2% over Q2 2021 and 8.3% more than Q1 2021. Demand for semiconductors is projected to continue to rise substantially in the long term, as the world continues using chips to become smarter, greener, more productive, and better connected. - John Neuffer, Semi Industry Association President and CEO, Aug. 3 We are continuing to invest in our global platform, with 39 projects underway around the world as of June 30th, totaling nearly 300 megawatts of incremental capacity, most of which is scheduled for delivery over the next 12 months... Market intelligence firm Gartner recently conducted its sixth annual survey of Chief Data officers and less than 35% of these executives reported their business have achieved their data sharing objectives, including data exchange with external data sources that drive revenue-generating business outcomes. - Digital Realty Trust , July 30 Mobile revenue grew 52% year-over-year, as we capitalized on technology-rich content, powering an impactful set of 5G customers. In parallel, broad markets revenue was 50% year-over-year, benefiting from strong demand for IoT solutions, including Wi-Fi 6 and 6E, and smart audio, as well as emerging use cases in industrial and automotive markets. - Skyworks Solutions , July 29 In the second half, we expect overall demand to exceed supply due to rising demand from the accelerating penetration of 5G, the continuation of the work-from-home trend, and growing demand for safety stock from customers. - Samsung Foundry business, July 29 Foundry spending is occurring in both leading-edge and mature technologies to meet the end demand for various market drivers like AI, 5G in gaming, as well as specialty chips needed for things like IoT, image sensors and power devices. - Lam Research , July 28 We're seeing demand across virtually every industry because our products and technologies are essential ingredients that enable digital transformation in the cloud economy... For calendar 2021, we're maintaining our forecast for high single-digit growth for global 3G, 4G, 5G handsets, including 450 to 550 million 5G handsets. Given the strong adoption of 5G in developed regions in China, we have a bias towards the high-end of our 5G forecast. - Qualcomm , July 28 Cloud and Service Provider customers are all recognizing the strategic importance of the network and investing to support a more distributed workforce which is increasingly reliant on high bandwidth applications such as real-time video collaboration. - Juniper Networks , July 27 Teams usage has never been higher. We are nearly 250 million monthly active users as people use Teams each day to communicate, collaborate, and co-author content across work, life, and learning... We have nearly 80 million monthly active Teams phones users, with total calls surpassing one billion in a single month this quarter, and we're just getting started... 124 organizations now have more than 100,000 users of Teams, and nearly 3,000 have more than 10,000 users. More broadly, across Microsoft 365, we are seeing double-digit year-over-year seat growth in every segment from frontline and small business to enterprise. - Microsoft , July 27 We're seeing unprecedented demand as the digitization of everything is accelerated by the superpowers of AI, pervasive connectivity, cloud to edge infrastructure, and increasingly ubiquitous compute... we are seeing near-term recovery across traditional data center market, as well as explosive long-term demand from the cloud to the intelligent edge. Our digital society is creating data at an unspeakable pace... We expect Data Center Group to grow sequentially, achieving double-digit year-on-year growth in the second half as it accelerates through the year... Similar revolutions are occurring in the areas of connectivity where the data center will be transformed by silicon photonics and 5G, which is hitting its stride with Open RAN and in autonomous driving... - Intel , July 22 5G is increasingly deployed around the world. We see the North American market moving very fast with a strong demand for 5G and it will be a key opportunity now as the operators are building out mid-band spectrum that will be lit up at the end of the year. - Ericsson , July 16 Finally, I wanted to share a recent video interview I participated in with Ricky Wright, CEO of Alkaline Water , a company that is riding the tailwinds of my Cleaner Living investing theme. We've owned WTER shares at the Stocks Under $10 portfolio for some time, and it's been a great performer but we continue to like the shares given the geographic and product expansion opportunities. Tune in to hear Ricky discuss those as well as why he's excited by brand ambassador Shaquille O'Neil. (AMZN, GOOGL and MSFT are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)

Making the Connection: This Tech-Investing Theme Completes the Circuit

Quarterly earnings have so far revealed a number of data points for my 'Digital Infrastructure and Connectivity' investing theme. Let's connect the dots.

Columnist Conversation

We Should Be in for Better Starting Soon

Stocks Under $10

Two Good Signs -- Especially for Small-Cap Investors

COLUMNIST TWEETS

Please Join or Log In to manage and receive alerts.