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.
