As investors welcome the new year, one of the key trends to watch will be the rollout of 5G technology, which will put ETFs like the Defiance 5G Next Gen Connectivity ETF (NYSEArca: FIVG) from Defiance ETFs in perspective.
As the world awaits the 5G rollout, manufacturers are already gearing up for its anticipated arrival. For example, Apple is already developing iPhones that will support 5G technology.
According to a CNBC report, as the world prepares for the arrival of “5G high-speed networks, manufacturers are developing more connected devices, which means more microprocessors.
To meet that demand, large chipmakers like Intel, Samsung and Taiwan Semiconductor Manufacturing (TSMC) are boosting their spending on equipment from top suppliers.”
“We are likely entering a decade+ expansionary period in the semiconductor industry as compute applications grow beyond PCs, phones, and tablets,” wrote Weston Twigg, an analyst at KeyBanc Capital Markets. “The ramp of 5G should enable more connected devices and a meaningful ramp in edge compute.”
5G technology will use a higher frequency band versus the current 4G technology standard, resulting in faster transmission of data. Being able to transmit copious amounts of data at a faster rate is certainly of benefit for wireless companies and their users, but 5G could be a major disruptor in various industries.
The Defiance Next Gen Connectivity ETF is the first ETF to emphasize securities whose products and services are predominantly tied to the development of 5G networking and communication technologies. FIVG does this by tracking the BlueStar 5G Communications Index, and FIVG attempts to invest all, or substantially all, of its assets in the component securities that make up the Index.
The possible applications of 5G technologies are only in the exploration stages, and the possibility of returns is uncertain and may not be realized soon. Nonetheless, it presents an opportunity that could see early adopters reap the benefits, especially if the technology is utilized to its fullest capabilities.
For broad-based technology exposure, investors can also look to:
- Technology Select Sector SPDR ETF (NYSEArca: XLK): tries to reflect the performance of the Technology Select Sector Index, which is comprised of technology and telecom sector of the S&P 500. The ETF includes companies from technology hardware, storage, and peripherals; software; diversified telecommunication services; communications equipment; semiconductors and semiconductor equipment; internet software and services; IT services; electronic equipment, instruments and components; and wireless telecommunication services.
- Vanguard Information Technology ETF (NYSEArca: VGT): tries to reflect the performance of the MSCI US IMI Information Technology 25/50 Index, which includes information technology stocks in the MSCI US IMI 25/50.
- iShares U.S. Technology ETF (NYSEArca: IYW): reflects the performance of the Dow Jones U.S. Information Technology Index, which includes all tech sector picks in the Dow Jones U.S. Index. Due to the Dow Jones’ classification of information tech names, healthcare technology stocks may be included while payment technology stocks are excluded.
For more market trends, visit ETF Trends.