Back in January, we discussed three Power Trends that I see as some of the biggest moneymaking trends this year. The first of which was Energy’s Swan Song. That trend is playing out just as I expected, with energy stocks soaring more than 25% year-to-date, even though the S&P 500 index has slumped more than 7%.
But over in the tech sector, there are no mellifluous swan songs, only swan dives.
Year to date, each of the FAANG stocks is down…
- Meta Platforms (NASDAQ:FB): -43.97%…
- Apple (NASDAQ:AAPL): -7.21%…
- Amazon (NASDAQ:AMZN): -8.94%…
- Netflix (NASDAQ:NFLX): -33.61%…
- And Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL): -6.52%.
The FAANG stocks have been the cornerstone of the S&P 500 — with a combined market value of $7 trillion — for years. And although the S&P 500 index has not suffered a setback greater than 10% since the Covid-19-triggered washout of March 2020, the recent tech-stock slump has been much more severe.
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In a recent article on CNBC, other strategists and analysts are noting the same:
“Investors looking to put money into U.S. and China internet giants should be cautious as these companies are facing a myriad of challenges, strategists told CNBC.
“‘You have to be very careful when you approach companies like [Facebook-parent] Meta or Alphabet because as I said, in my view, they are sunsetting. They’re suffering from a number of issues,’ Viktor Shvets, head of global and Asian strategy at Macquarie Capital. He also named other companies like iPhone maker Apple and Chinese e-commerce platform Alibaba.
“‘So be very careful about these large digital platforms, but there are a lot of opportunities and profitable opportunities in the rest of [the] tech universe,’ he said.”
But, similar to the Energy Swan Song, there are also some profits to be made in the tech space…
5G Is Coming to the Tech Forefront
It’s the engine behind virtually all the growth we’ll see over the next decade.
And it’s the final “keystone” piece that every major technology trend today depends upon.
Without this technology firmly in place, all the other promising technologies you hear about today can’t reach full adoption.
The technology responsible for the acceleration of the Technochasm and its wealth-building — and wealth-destroying — properties is 5G.
And while 5G has been hyped for years, it’s only now that the concept is beginning to reward investors.
Here’s an example: When 5G was just rolling out in 2017, Verizon (NYSE:VZ) had only 11 pilot testing cities.
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But now… after hundreds of billions of dollars invested in 5G infrastructure… there are enough base stations across America that 5G is ready to unleash its full potential.
And every day that this coverage expands, we get closer to the major inflection point of 5G.
We’re seeing the basic 5G network right now.
But within months, we’re going to see 5G’s real potential surface.
To define it quickly, 5G is the next generation of mobile broadband that will replace or augment existing 4G LTE connections.
5G technology drastically improves upload and download speeds, while also improving latency, which is the time it takes devices to communicate with wireless networks.
Obviously, it is impossible to predict with certainty which companies will benefit the most. But this opportunity is still in its infancy, which means it will produce a growing list of winners over time.
The companies that understand what’s happening and harness this powerful new 5G network to improve or create entirely new services and industries could quickly grow and become the next “FAANG” stocks.
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On the flip side…
Companies that think 5G is nothing more than faster download speeds and don’t start preparing for its impact on their industry or their customers… will be doomed.
It’s the same with investors.
Those who understand that 5G is a much bigger story than faster smartphones… and understand that the last few hype-filled years was just the build-out phase and not an empty promise… could make incredible gains as this story plays out.
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