• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Technology

5G and Cloud Capex Could Be Pockets of Strength for Tech in the Near Term

Stimulus efforts could give a boost to 5G infrastructure spending, and usage spikes for many online services could drive higher cloud capex.
By ERIC JHONSA
Mar 17, 2020 | 03:06 PM EDT
Stocks quotes in this article: ZM, WORK, NFLX, AMZN, NOK, ERIC, MRVL, XLNX, CREE, INTC, AMD, STX, WDC, NVDA, AVGO, MU, VZ, CHL, ANET, NXPI

Given its impact on consumer hardware purchases, enterprise IT spending, online ad sales and much else, the short-term economic disruption caused by the COVID-19 outbreak definitely won't leave the tech sector unscathed.

But there are a few types of tech spending that could hold up well during the downturn. As others have noted, a variety of cloud app developers and consumer internet companies -- from Zoom  (ZM) and Slack (WORK) , to Netflix  (NFLX) and Amazon.com (AMZN) -- are likely to see higher usage/demand as tens of millions of consumers stay home.

Two other areas that could hold up well, and which have gotten less attention, are spending on 5G infrastructure gear and cloud data center hardware.

In recent weeks, with Beijing hungry to boost business spending in the wake of China's COVID-19 outbreak, Chinese mobile carriers have collectively issued tenders for 480,000 5G base stations. China Mobile (CHL) , the country's biggest carrier, has also issued tenders for core network gear needed to support its base stations.

Separately, Verizon (VZ) announced last week that it's hiking its 2020 capex budget by $500 million, to a range of $17.5 billion to $18.5 billion. And with the U.S. and various European countries floating stimulus packages that include (among many other things) infrastructure spending, it might not be long before other major telcos also announce that their 5G capex will be rising as well.

Mobile infrastructure capex was under pressure prior to the COVID-19 outbreak, as telcos seeing little or no service revenue growth opted for a go-it-slow approach to building out 5G networks at a time when it isn't clear how much of a revenue boost those networks will provide. Hardware suppliers such as Nokia (NOK)  and Ericsson (ERIC) would naturally benefit from higher 5G capex, as would chip suppliers such as Marvell Technology (MRVL) , NXP Semiconductors (NXPI) , Xilinx (XLNX) and Cree (CREE) .

Cloud capex, on the other hand, was already on the upswing prior to the COVID-19 outbreak, and there's a good chance that it will continue growing in the near-term. More servers will likely be needed as activities such as streaming, video calls, gaming sessions and social media browsing all see usage spikes, and the tech giants that have been responsible for the lion's share of cloud capex have balance sheets that make it easy for them to afford such spending (just ask Amazon, which announced on Monday that it plans to hire 100,000 warehouse and delivery workers).

Chip suppliers such as Intel (INTC) , AMD (AMD) , Nvidia (NVDA) , Broadcom  (AVGO) and Micron  (MU) would benefit from higher cloud capex, as would networking hardware supplier Arista Networks  (ANET) and hard drive/SSD suppliers Seagate (STX)  and Western Digital (WDC) .

For companies exposed to 5G infrastructure and/or cloud data center capex, it's worth remembering that their sales to many other end-markets are likely to slump in the near-term, even if their 5G and cloud-related sales remain strong. But in an environment like this, a pocket or two of strength can still be a sight for sore eyes.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.
TAGS: Investing | Technology |

More from Technology

I'm Intrigued by the Recent Pullback in Aurora Mobile

Timothy Collins
Feb 26, 2021 3:30 PM EST

While the Chinese company is still not profitable, it is cash flow positive.

Nvidia's Decline Doesn't Make It a Buying Opportunity - Yet

Bruce Kamich
Feb 26, 2021 7:54 AM EST

NVDA has weakened despite great fundamental numbers.

Remember, This Ain't Noah's 'ARK,' It's Still Just a Leveraged Tech Fund

Timothy Collins
Feb 25, 2021 12:40 PM EST

Let's put ARKK in perspective with TQQQ and QQQ, as we get all the hype about Cathie Wood and the fund's 210% rise.

Here's My Technical View on Advanced Micro Devices

Bruce Kamich
Feb 25, 2021 11:00 AM EST

AMD's near-term price action troubles me.

There's a Green Day Coming in Apple

Mark Sebastian
Feb 24, 2021 1:56 PM EST

These calls are going to end up in the money.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 11:32 AM EST JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    Navigating a Market Correction
  • 11:29 AM EST GARY BERMAN

    Where Does the Nasdaq Go From Here?

    Where does the Nasdaq Composite (CCMP) index go fr...
  • 12:31 PM EST GARY BERMAN

    Has the Short-Term Top Come for the XLF/Banks?

    The has triggered a long-term overbought signal ...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login