These days, the tech giants have gotten really big. Apple (AAPL) is $925 billion, by market cap. Microsoft (MSFT) is over $1 trillion. If these were countries, their GDP would be comparable to the Netherlands and Indonesia, respectively.
But even to these companies, $1 billion is a pretty big chunk of change.
So when, for example, Microsoft spends $1 billion on artificial intelligence – it’s worth paying attention.
Now Apple is spending $1 billion to acquire a modem division of Intel (INTC).
To understand why, we’ve got to clear up one thing. When most people think of modems, they think of something like this – the equipment that gets you online at home or work:
But the modems we’re talking about here are actually tiny chips that go inside smartphones (and other mobile devices):
Now, at this point, Apple is relying on Qualcomm (QCOM) to supply modem chips. But Apple’s biggest competitors, Samsung and Huawei, have developed their OWN chips – ones that can act as the modem and the processor, all in one.
Custom hardware is a hallmark of Apple products. So, it’s no surprise that it wants this sort of chip for itself. But why now?
Because Apple sees the writing on the wall…and that writing says: “5G.”
5G means a few different things to different people. For example, AT&T (T) now offers “5G Evolution,” which is really just a stepping-stone on the path to 5G.
But bottom line – when you hear the word 5G, think speed.
With 5G internet, download speeds could be between 10 and 100 times faster than what’s currently available. Instead of two minutes or more to load a webpage, like we dealt with in the 1990s, it’ll take you six seconds to download a whole movie with 5G!
Every mobile carrier is racing to roll out 5G networks. That way, they can get people into new contracts – by upgrading them to 5G phones.
This is, of course, where companies like Apple come in. With this new acquisition, Apple will get Intel’s entire smartphone workforce (of 2,200 employees), all working on new “superchips” designed for 5G speeds. Like Samsung and Huawei, Apple knows you’ve got to bring plenty of muscle to the 5G game.
But Many MORE Billions Will Soon Be Spent – and Won
Ultimately, 5G is much more than a smartphone upgrade. Worldwide, the 5G infrastructure market is expected to grow from $2.55 billion in 2020 to over $42 billion by 2025. That’s a 75.1% CARG increase in just one market – far larger than many other industries could ever imagine in just five years.
After all, think what 5G speeds could do for self-driving cars. Or for “smart home” devices, like Nest smoke detectors, security cameras and thermostats.
And one day, “smart homes” will grow into “smart cities,” with networks for lighting, parking, traffic and waste management, citizen engagement, safety and security – all of them communicating by internet.
All of this will need 5G to work. Current networks aren’t quite fast and reliable enough to handle it – not when applications like healthcare and utilities are thrown into the mix.
Another key application of 5G is “the mother of all technologies,” a breakthrough that will change our world.
Essentially, whoever controls 5G is anticipated to control the internet several years from now. So, the long-term investment potential is huge.
The whole industry is shifting to 5G, and soon Apple will be along for the ride – but I don’t view AAPL as the right way to play 5G now. Apple has a history of making more money from services (like AppleCare and Apple Music) than from the devices themselves. And, anyway, it won’t deliver 5G phones until September 2020.
Samsung and Huawei are further ahead on 5G – but instead of the companies that need 5G technology, I think more money can be made in the one that’s involved in the creation of 5G. That will be the stock that lets us cash in on that whole meteoric rise of the 5G market.
In Growth Investor, we own a little-known electronics company – that is helping some high-profile clients move to 5G. Its customers include the top 25 telecoms…the top 25 tech companies…and 78 of the Fortune 100 companies.
Go here to watch my presentation on the huge technological shift going on now. At the end, you’ll get the chance to hear my #1 Investment for the Coming 5G Revolution – for free.