This is the year of 5G, and these chip stocks will be the winners, says BofA

Published Tue, Jun 1 20219:46 PM EDTUpdated Tue, Jun 1 202111:01 PM EDT

Several semiconductor stocks are set to benefit from what Bank of America says will be a big trend as countries recover from the pandemic: 5G. Semiconductors, or chips, are vital components of smartphones and are also part of the infrastructure necessary for 5G technology — the next generation of mobile internet, with extra-fast download and upload speeds. "5G could be the ultimate 'reopening' theme, as consumers venture out and demand faster cellular broadband coverage and capacity versus last year's dependence on Wi-Fi," the bank's analysts, led by Vivek Arya, wrote in a note published Wednesday. Only around 20% of smartphones had 5G technology last year, but that is set to increase to 40% in 2021, the bank estimated. It comes as major economies emerge from the coronavirus pandemic facing a major shortage of semiconductors , which is hurting a host of businesses. Given that backdrop, Bank of America identified some favorite semiconductor stock picks. Qualcomm for its "high-margin royalty business," according to BofA. The bank noted comments from management that Qualcomm had made up for a reduction in orders from one large customer by gaining revenue from another division "with strong margin profile." Analog Devices had an estimated 9% exposure to 5G in 2020, according to BofA, and that is set to increase to 11% in 2022. The analysts said they like its "diverse product lines." Qorvo is a pick for the bank for its "diverse 5G handset exposure with solid infra (infrastructure) portfolio." The analysts noted comments from management that "demand is very firm" for the second and third quarters of this year. Marvell had an estimated 12% exposure to 5G in 2020 according to BofA, and that is set to rise to around 26% in 2022. The bank also likes the stock for its other products, such as its cloud services. Broadcom has "exposure across premium Apple devices as well as [infrastructure] development," the analysts said. "5G infrastructure growth should rapidly expand exposure across infrastructure vendors, although we note the diverse product lines across these firms … [make] them less dependent on telecom performance," the analysts said. "We could see additional summer volatility, but we expect a recovery as 5G builds ramp in US/Europe, and as seasonal holiday demand lifts up" in the fourth quarter and late third quarter, they said.

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Several semiconductor stocks are set to benefit from what Bank of America says will be a big trend as countries recover from the pandemic: 5G.

Semiconductors, or chips, are vital components of smartphones and are also part of the infrastructure necessary for 5G technology — the next generation of mobile internet, with extra-fast download and upload speeds.

"5G could be the ultimate 'reopening' theme, as consumers venture out and demand faster cellular broadband coverage and capacity versus last year's dependence on Wi-Fi," the bank's analysts, led by Vivek Arya, wrote in a note published Wednesday. Only around 20% of smartphones had 5G technology last year, but that is set to increase to 40% in 2021, the bank estimated.

It comes as major economies emerge from the coronavirus pandemic facing a major shortage of semiconductors, which is hurting a host of businesses.

Given that backdrop, Bank of America identified some favorite semiconductor stock picks.