Whenever there is a generational shift in technology, there's more opportunity for accelerated change and disruption of the status quo, which is what one Fidelity manager believes is happening now with the move to fifth-generation (5G) networks.
"I think 5G's potential is as vast as what human ingenuity can create," says Matt Drukker, analyst for Fidelity® Disruptive Communications Fund (FNETX).
5G wireless aims to be better than 4G on many fronts, Drukker says, driving better consumer experiences and innovation across many industries. He says carriers and equipment suppliers are aiming to achieve 5G targets that will enable 10x better peak speed, throughput, latency, and connection density, compared with 4G.
The trick to navigating the segment, Drukker says, is looking past the marketing and public relations battle among wireless carriers and focusing on companies with the competitive position to grow profitably in the longer term.
According to Drukker, 5G speeds will mean consumers can almost instantly download full-length movies on their devices. It also allows more devices to be connected at lower cost, and with far longer battery life. As a result, he thinks the use of hyperscale cloud and machine learning will expand. He adds that the key to unlocking some new benefits of 5G might be in artificial intelligence.
Moreover, Drukker says, more devices connected to 5G networks in homes, offices, and factories will require more-robust chips. Even connected base stations that receive and transmit signals within 5G networks will require an upgrade cycle, he says.
"Keep in mind, 5G won't work on existing smartphones either, so this is a reason for consumers to shop for a new device. This is potentially a big change, and major device makers might sell lot of new product." he says.
In terms of potential new applications, Drukker believes 5G could bring about more remote-monitoring systems among manufacturing companies, telehealth offerings, better remote classrooms that take advantage of virtual reality, and play an important role in autonomous driving. "4G brought video to the palm of our hands, and 5G will bring even more-robust interactive experiences in gaming and augmented reality," according to Drukker.
"History suggests we will see applications in a few years that few ever imagined, so keeping an open mind and looking for emerging trends is important," he says.
Some of the fund's notable investments in 5G as of July 31 included NXP Semiconductors (NXPI), which makes multi-chip modules used in 5G hardware; American Tower (AMT), which leases land and equipment for use by cell-tower network operators; Activision Blizzard (ATVI), which publishes interactive entertainment; and application providers RingCentral (RNG) and Zoom Video Communications (ZM), both of which he thinks can offer better 5G-powered communication and collaboration offerings in time.
Fidelity® Disruptive Communications Fund (FNETX) held securities mentioned in this article as of its most recent holdings disclosure. For specific fund information such as standard performance and holdings, please go to the fund ticker symbol link on this page.
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