In this article, we discuss the 10 best 5G stocks to buy according to short sellers. We also discuss an expert’s opinion of the future of 5G technology and its interconnectedness with AI.
5G, or fifth-generation wireless technology, is the latest evolution in mobile networks, which is designed to significantly improve speed, reduce latency, and enhance the capacity and connectivity of mobile devices. A Market Research Future report estimates that in 2024, the 5G market is projected to be worth $15.03 billion, and by 2032, it could reach $229.41 billion. This rapid increase represents a compound annual growth rate (CAGR) of 40.60% during the forecast period. According to some experts, 5G is one of the most important trends in technology along with artificial intelligence (AI).
5G and AI Could be Catalysts of Global Digital Transformation
In a CNBC interview at the Mobile World Congress Shanghai on June 26, director-general of the GSM Association, Mats Granryd highlighted the deep connection between 5G and AI and suggested that their mutual rise is not accidental. He said that “AI feeds off 5G and 5G feeds off AI.” This is especially evident in China, where the development of standalone 5G networks is well advanced and discussions are already shifting toward 5G Advanced (5.5G). While some countries lag, like the Philippines, Mats pointed out that this dynamic between 5G and AI is most prominent in regions with widespread 5G coverage.
When asked about the rivalry between countries like the U.S. and China in AI and 5G, Mats said that such competition is insignificant. He said that from his experience on the GSMA board, which represents the 25 largest mobile operators globally, the focus is on creating common standards and specifications rather than competing.
He talked about the difficulties of the 2G and 3G eras when different technologies created challenges for global connectivity. The shift to a unified 4G standard was a pivotal moment that laid the foundation for the digital economy.
Mats believes that 5G will follow a similar path to become a common platform worldwide, which will also extend to AI. While some regions may advance faster than others initially, he showed confidence in the fact that everyone will eventually catch up and benefit from the integration of AI with 5G.
With that, we discuss the 10 best 5G stocks to buy according to short sellers.
10 Best 5G Stocks To Buy According to Short Sellers
Our Methodology
For this article, we used stock screeners and ETFs to identify companies involved in the 5G market. We then selected 10 stocks with the smallest short interest and listed them in descending order of their short interest. We also mentioned the hedge fund sentiment around each stock which was taken from Insider Monkey’s database of over 900 elite hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best 5G Stocks To Buy According to Short Sellers
10. T-Mobile US, Inc. (NASDAQ:TMUS)
Short Interest as % of Shares Outstanding: 1.37%
Number of Hedge Fund Holders: 64
T-Mobile US, Inc. (NASDAQ:TMUS), originally launched as Voicestream Wireless in 1994, has grown into a major player in the wireless industry. With its commitment to delivering high-quality 5G services, the company offers a range of products including unlimited 5G plans, home internet, and fixed wireless access solutions. It is among our best 5G stocks to buy.
It has aggressively expanded its 5G network, providing customers with both Extended Range 5G and Ultra Capacity 5G. This expansion is supported by a broad spectrum portfolio that includes low-band, mid-band, and millimeter-wave frequencies, which are important for delivering fast, reliable service.
The company’s 2020 acquisition of Sprint has significantly strengthened its position in the industry, which allowed it to scale its operations and better its network infrastructure. Its investment in spectrum management and network quality is evident, as it claims its network offers download speeds up to three times faster than its competitors and provides nearly six times the 5G coverage compared to the closest rival.
In the second quarter, T-Mobile (NASDAQ:TMUS) reported an EPS of $2.49 and total revenue of $19.77 billion. In the quarter, service revenues grew to $16.43 billion, reflecting a 4.4% increase year-over-year, while postpaid service revenues saw a 6.9% rise to $12.9 billion. The company achieved record-high postpaid phone net additions of 301,000, bringing its total customer connections to over 100 million. This strong performance is further highlighted by a record-low upgrade rate, which shows high customer satisfaction driven by its robust 5G network.
Additionally, the company made headlines in July with a joint venture with KKR to acquire fiber service provider Metronet for $4.9 billion. This move marks the company’s expansion into fiber internet, complementing its leading 5G services and strengthening its overall market position.
The company is optimistic for the full year, projecting total postpaid customer net additions between 5.4 million and 5.7 million for the year and expecting core adjusted EBITDA to fall between $31.5 billion and $31.8 billion. These figures reflect its strong market presence and its ability to capture growth opportunities in both wireless and fiber internet services.
In the second quarter, 64 hedge funds held positions in T-Mobile (NASDAQ:TMUS) and their stakes amounted to $2.62 billion. As of June 30, Berkshire Hathaway is the most dominant shareholder in the company and has a position worth $823.113 million.
9. Cisco Systems, Inc. (NASDAQ:CSCO)
Short Interest as % of Shares Outstanding: 1.30%
Number of Hedge Fund Holders: 61
Cisco Systems, Inc. (NASDAQ:CSCO) is an American multinational technology conglomerate headquartered in California. The company started its journey in 1984 and has been a leading innovator in digital communications. It gained recognition after developing multiprotocol routers that facilitated communication across different networks. It is one of the best 5G stocks to buy according to short sellers.
61 hedge funds had stakes worth $1.6 billion in Cisco (NASDAQ:CSCO) in the second quarter. As of June 30, Harris Associates holds 10.4 million shares of the company, valued at $496.382 million, making it the company’s largest shareholder.
Cisco’s (NASDAQ:CSCO) portfolio includes a broad range of networking hardware, software, and services, specializing in areas such as the Internet of Things (IoT), domain security, videoconferencing, and energy management. Some of its products include Webex for video conferencing, OpenDNS for online security, and the Silicon One chip, which is designed to handle huge amounts of data.
Its approach to 5G is centered around its Cisco ONE architecture, which is designed for cloud and software-based management. This setup connects both business and service provider networks, which makes it easy for different types of connections to work together smoothly. This includes seamless roaming between 5G cellular networks and Wi-Fi, particularly with the latest Wi-Fi 6 technology. Wi-Fi 6 shares several features with 5G, such as improved speed and efficiency.
Additionally, Cisco Private 5G is a managed service that gives businesses all the benefits of a private 5G network without the high upfront costs or the hassle of managing it themselves. It provides fast and reliable internet, along with features like tracking and managing devices and applications for better security. Businesses can use Cisco Private 5G to boost their digital transformation, improve operations, and support various applications like robotics, asset tracking, and remote broadcasting.
8. Verizon Communications Inc. (NYSE:VZ)
Short Interest as % of Shares Outstanding: 1.14%
Number of Hedge Fund Holders: 67
Verizon Communications Inc. (NYSE:VZ) stands out as one of the three major nationwide 5G providers in the U.S. and is a prominent player in the telecommunications sector. The company is well-known for its substantial investments in 5G technology and infrastructure. It offers a range of 5G services, including 5G Ultra Wideband, 5G Home Internet, and 5G Business Internet, among others. It takes the eighth spot on our list of the best 5G stocks to buy according to short sellers.
The 5G Ultra Wideband service is aimed at high-capacity needs and delivers strong performance for demanding applications. Meanwhile, the 5G Home Internet provides fixed wireless high-speed internet with no data caps. For businesses, its 5G Business Internet offers a solution tailored to meet the demands for reliable and secure connectivity.
In Q2, 67 hedge funds had investments in Verizon (NYSE:VZ), with positions worth $1.5 billion. Third Point is the top investor in the company as of Q2 and has a position worth $192.797 million.
Verizon (NYSE:VZ) continues to show resilience and growth potential in a mature and competitive telecommunications market. In the second quarter, the company reported revenue of $32.8 billion, marking a modest increase of 0.6% from the previous year. Despite the overall slow growth in the industry due to near-saturation in U.S. telecom services, it managed to achieve an adjusted EPS of $1.15. This performance highlights the company’s ability to maintain solid results even in a challenging environment.
A significant portion of the company’s revenue comes from its wireless services, which saw a 3.5% increase year-over-year, reaching $19.8 billion. This growth in wireless service revenue reflects the effectiveness of the company’s pricing strategies and the strong demand for its wireless broadband internet offerings.
Verizon’s (NYSE:VZ) ability to attract and retain a large consumer base, while also achieving a 2% increase in revenue from its wireless service, suggests that it is effectively tapping into existing market opportunities despite its large size and established presence.
Additionally, its focus on expanding its consumer segment has proven successful, with revenue in this category rising by 1.5% to $24.9 billion. This indicates that the company is not only sustaining its current customer base but also growing its market share.
On August 12, TD Cowen analyst Gregory Williams reiterated a Buy rating and $51.00 price target on Verizon (NYSE:VZ). Williams’ positive outlook is supported by insights gained from an investor meeting with the company’s Chief Network Officer Lynn Cox and the head of investor relations, Brady Connor. The analyst highlighted that the company’s C-band spectrum, important for advanced 5G capabilities, is expected to be largely deployed by the end of 2025. Additionally, the anticipated AI-driven enhancements to the network are expected to provide a boost, positioning it for future growth.
7. Crown Castle Inc. (NYSE:CCI)
Short Interest as % of Shares Outstanding: 1.12%
Number of Hedge Fund Holders: 38
Crown Castle Inc. (NYSE:CCI) is a real estate investment trust (REIT) and a key player in the shared communications infrastructure sector. The company has a network of more than 40,000 cell towers, over 90,000 route miles of fiber, and around 115,000 small cells on air or under contract. It ranks at 7 on our list of best 5G stocks to buy according to short sellers.
Crown Castle’s (NYSE:CCI) 5G offerings position the company as a vital player in the future of communications infrastructure. As revealed by the company’s management at its latest earnings call, the continued demand for wireless data, which is driven by the expansion of 5G networks, supports a strong growth outlook for the company, especially within its tower business.
Management mentioned that the company’s agreements with major carriers provide a reliable and steady income, which could help it achieve an expected 4.5% revenue growth in 2024. These contracts ensure that the company has a strong financial foundation, even if the overall market experiences ups and downs.
Moreover, Crown Castle’s (NYSE:CCI) strategic focus is on optimizing its fiber and small cell businesses, which is set to enhance its 5G-related growth potential. The company’s shift towards providing additional customer solutions that use its existing high-quality fiber footprint will allow it to add revenue with reduced capital expenditure, which could improve profitability.
The small cell business, which is an important component of 5G networks, is also positioned for solid growth. Despite a short-term reduction in anchor node builds (main starting points for expanding a small cell network), the company expects small cell revenues to grow by double digits over the next several years. This growth is supported by the company’s large number of planned projects and the long-term need for its customers to build denser, more powerful networks in important areas.
In Q2, 38 hedge funds held Crown Castle’s (NYSE:CCI) shares worth $1.045 billion. As of June 30, Fisher Asset Management is the company’s most prominent shareholder with 4.88 million shares, worth $477.223 million.
6. NVIDIA Corporation (NASDAQ:NVDA)
Short Interest as % of Shares Outstanding: 1.12%
Number of Hedge Fund Holders: 179
NVIDIA Corporation (NASDAQ:NVDA) is an American tech company known for designing graphics processing units (GPUs) and software used in everything from gaming to AI. The company excels in high-performance computing and AI technologies.
Its Graphics segment offers GeForce GPUs for gaming, GeForce NOW for game streaming, and Quadro/NVIDIA RTX GPUs for enterprise workstations, along with Omniverse software for metaverse development. The Compute and Networking segment includes data center computing platforms, networking systems, Jetson robotics, embedded platforms, and NVIDIA AI Enterprise solutions.
NVIDIA’s (NASDAQ:NVDA) Aerial platform is advancing 5G and future 6G technology with a range of tools designed for both commercial and research use. The Aerial CUDA-Accelerated RAN helps build software-defined, cloud-native 5G and 6G networks using GPU-accelerated libraries for important network functions. This framework is flexible and can be extended with AI components to enhance performance.
The Aerial Omniverse Digital Twin allows for detailed simulations of 6G networks, from individual towers to entire cities. It includes realistic models and simulators to help researchers improve network algorithms and transmission efficiency.
The company’s Aerial platform also supports the development of virtualized 5G networks, which run on the company’s computing hardware to boost performance. Aerial allows data centers to run both 5G and AI applications at the same time, which makes them more efficient and adaptable. For researchers, it offers the 6G Research Cloud Platform and provides access to these tools through the cloud to support advanced 6G research and development.
NVIDIA’s (NASDAQ:NVDA) shares were held by 179 hedge funds in the second quarter, at a combined stake value of $53.67 billion. Fisher Asset Management is the company’s biggest shareholder with 93.4 million shares worth $11.54 billion, as of June 30. It is our 6th best 5G stock to buy according to short sellers.
Aoris International Fund stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q2 2024 investor letter:
“If Information Technology was the dominant sector for the quarter, NVIDIA Corporation (NASDAQ:NVDA), which is the largest supplier of microprocessors used for generative AI applications, was the dominant company. NVIDIA’s share price rose by a third in the quarter and has increased by 255% so far this year. Since the beginning of 2023, its market value has risen by 8.3x, or $4.3 trillion, making NVIDIA the third largest company in the world by this measure.
As a result of the unusually strong stock price performance from NVIDIA and a few other large companies, equity markets have become increasingly concentrated. You can see this in the chart below, which shows that on 30 June, 27% of the market value of the 500 largest US companies was attributable to just five companies, more than twice the average of the last 20 years.
The composition of the Aoris International Fund will always be very different to that of the broader equity market. There will be periods, such as the most recent quarter, where this contributes to our performance lagging that of our benchmark. When it comes to NVIDIA and other AI-centric companies, rapid growth is exciting, but it makes it difficult for us to judge what is normal. Our preference is to own established leading companies where we can make a more confident, evidence-based judgement about their growth and profitability.”
5. American Tower Corporation (NYSE:AMT)
Short Interest as % of Shares Outstanding: 1.09%
Number of Hedge Fund Holders: 63
American Tower Corporation (NYSE:AMT) is a prominent global REIT that manages a vast portfolio of over 224,000 communication sites across 25 countries. This extensive network includes wireless towers, distributed antenna systems, and data centers. The company leases space on these sites to a diverse group of clients, including wireless service providers, media companies, and government agencies. It ranks 5th on our list of the best 5G stocks to buy according to short sellers.
As a major independent player in wireless communications infrastructure, the company is positioned to benefit from the growing demand for data and the expansion of 5G networks. With the increasing investment by carriers in network capacity to support rising mobile data consumption, its broad and scalable infrastructure is ideally suited to meet these needs. The company’s assets are essential for supporting wireless networks as they provide extensive coverage that aligns with the ongoing rollout of 5G technology.
In the second quarter, American Tower (NYSE:AMT) saw a 4.6% year-over-year increase in total property revenue, reaching $2.85 billion. Tenant billings also showed strong growth, rising 6.1% year over year to $119 million. The increase reflects a 5.3% rise in organic tenant billing, amounting to $103 million, driven by the expanding deployment of 5G and higher demand for mobile data services.
According to a study by Next Move Strategy Consulting, North America is expected to lead the global 5G market due to high adoption rates and advanced infrastructure. Their study highlights that 60% of North American consumers are willing to pay more for 5G coverage. It also projects that 5G will add $2.2 trillion to the global economy from 2020 to 2030, with North America expected to benefit significantly. American Tower’s (NYSE:AMT) substantial presence in the U.S. and Canada, with 42,905 communication sites, contributing $1.32 billion in revenue in Q2, makes the company a dominant player in the 5G landscape.
Additionally, its data center segment, CoreSite, reported its second-highest quarter of new business signings, which shows continued growth in this area. Overall, the company’s broad asset base, along with its ability to adapt to industry trends and high demand for connectivity, positions it well for ongoing success.
63 hedge funds had stakes worth nearly $3 billion in American Tower (NYSE:AMT) in the second quarter of 2024. Akre Capital Management owns 6.13 million of the company shares worth $1.2 billion, making it the most significant shareholder of the company as of Q2.
Baron Real Estate Fund stated the following regarding American Tower Corporation (NYSE:AMT) in its first quarter 2024 investor letter:
“Following a more than 30% rebound in the fourth quarter of 2023, shares of American Tower Corporation (NYSE:AMT) lagged in the first quarter of 2024. The uncertainty around the timing and ultimate financial impact of American Tower’s India business sale, ongoing lower overall spending by wireless carriers, and higher interest rates weighed on the company’s shares. Please refer to our “Top Net Purchases” section for our rationale for acquiring additional shares.
In the first quarter, we continued to acquire additional shares of American Tower Corporation, a global operator of over 200,000 wireless towers. We believe that 2023 marked a trough in earnings growth, financing/interest rate headwinds, and valuation bottoming. Looking ahead, we are more optimistic about the company’s prospects due to its: i) accelerating growth expectations; ii) cash flow stability underpinned by core developed markets; iii) secular demand drivers such as growing mobile data usage, 5G spectrum deployment and network investment, edge computing, and connected homes and cars, which will require increased wireless bandwidth and increased spending by the mobile carriers; and iv) strong growth within CoreSite, its network-dense data center company, and optionality with that business segment as future network needs and architecture evolve.”
4. Broadcom Inc. (NASDAQ:AVGO)
Short Interest as % of Shares Outstanding: 1.09%
Number of Hedge Fund Holders: 130
One of the best 5G stocks to buy, Broadcom Inc. (NASDAQ:AVGO) is a leading global technology company that focuses on designing and developing a diverse range of semiconductor and software solutions. The company is deeply focused on key areas like cloud computing, data centers, networking, broadband, and wireless communications, making it a significant player in the advancement of 5G technology.
It offers a broad suite of products tailored to support 5G infrastructure, including essential 5G radio frequency components such as FBAR filters. Furthermore, its Trident 5-X12 Ethernet switch, known for being the among the first switch chips with an integrated neural network, significantly improves performance, density, and AI capabilities for 5G networks. The company also supplies wireless connectivity chips that facilitate high-speed 5G connections in mobile devices.
In Q2, 130 hedge funds had stakes worth $20.035 billion in Broadcom (NASDAQ:AVGO). Rajiv Jain’s GQG Partners is the company’s largest shareholder with $32.35 million shares worth $5.2 billion, as of June 30.
Broadcom (NASDAQ:AVGO) is seeing continued success as the demand for connected devices grows. As a major supplier of essential chips for computing and networking, it plays a crucial role in the expanding tech landscape.
In 2023, the company secured a significant multiyear agreement with Apple, focusing on the development of 5G radio frequency components, including advanced FBAR filters. The partnership strengthens the company’s position as a key provider of critical 5G technology for Apple’s devices, with production set to take place in various U.S. manufacturing and technology centers.
It’s influence extends beyond this deal, as the company is also exploring AI chip designs with famous tech giants like OpenAI and ByteDance. The company’s custom chip designs and networking semiconductors are integral to building AI systems, a sector experiencing rapid growth.
In the second quarter, Broadcom (NASDAQ:AVGO) saw its revenue from AI products hit a record $3.1 billion, which signals high demand. CEO Hock Tan projected that total AI sales for fiscal 2024 would exceed $11 billion.
Mar Vista Investment Partners, LLC stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q2 2024 investor letter:
“During the quarter, we established new investments in Broadcom Inc. (NASDAQ:AVGO) and Meta Platforms. We initiated a position in Broadcom in Q2. As a skilled aggregator, Broadcom acquires firms, streamlines their operations, and invests R&D dollars in mission critical products that generate industry leading profit margins, robust cash flows and high returns on invested capital. Its primary markets include AI accelerators targeting generative AI applications, networking & wireless semiconductors, and mission-critical infrastructure software solutions.
Broadcom is well-positioned to benefit from the rapidly expanding demand for custom AI accelerator chips that support the evolution of the generative AI market. The company is the second-largest producer of AI accelerator chips behind Nvidia and leads the market in custom AI ASIC chips. Its customers include leading hyper scalers like Alphabet and Meta who are turning to Broadcom for custom silicon due to its performance and cost advantages. We believe the company is a direct beneficiary of a multi-year capital cycle driven by hyper scalers building out next-generation AI factories.
Broadcom recently acquired VMware, the leader in virtualization software targeting the enterprise market. The integration of VMware is tracking ahead of plan as management has simplified its product bundles, transitioned to a subscription revenue model, and reduced operating costs. We believe this simplified go-to-market structure will result in strong top-line revenue growth and expanding operating margins. We believe Broadcom will compound intrinsic value per share in the mid-20% range over the intermediate term as it benefits from the AI-infrastructure build-out, a cyclical recovery in its legacy semiconductor business, and modestly accelerating growth from its infrastructure software business as VMware is successfully integrated.”
3. Apple Inc. (NASDAQ:AAPL)
Short Interest as % of Shares Outstanding: 0.77%
Number of Hedge Fund Holders: 184
Apple Inc. (NASDAQ:AAPL) is a leading American multinational technology company headquartered in Cupertino, California. It is known for its innovative consumer electronics, software, and services, and is best known for its flagship products including the iPhone, iPad, Mac computers, Apple Watch, and Apple TV. The company also offers a suite of services such as Apple Music, iCloud, and Apple Pay. It takes the 3rd spot on our list of best 5G stocks according to short sellers.
Apple’s (NASDAQ:AAPL) 5G journey started with its iPhone 12 in 2020 and it supported more 5G frequencies than any of its competitors in the market. While the company still uses Qualcomm modems, KGI Securities analyst, Ming-Chi Kuo believes that the company has plans to launch two iPhone models with its in-house 5G modem in 2025.
Apple (NASDAQ:AAPL) took the first major step toward the development of its modems when it agreed to acquire the majority of Intel’s smartphone modem business for $1 billion in 2019. The acquisition brought around 2,200 Intel employees, intellectual property, and equipment to Apple. Ming-Chi Kuo believes that a fourth-generation iPhone SE in the first quarter and a new ultra-thin iPhone 17 in the third quarter could have the company’s own modems.
In the second quarter, 184 hedge funds had stakes in Apple (NASDAQ:AAPL) at a combined value of $124.175 billion. As of Q2, Berkshire Hathaway owns 400 million shares of the company, worth $84.25 billion, making it the most prominent shareholder.
Mar Vista Investment Partners, LLC stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q2 2024 investor letter:
“Investors were reminded of the strength of the Apple Inc. (NASDAQ:AAPL) ecosystem as management demonstrated how generative AI solutions would be integrated into Apple’s 1.2 billion iPhone installed base. Apple plans to integrate generative AI features into its iOS 18, which will be broadly released in the fall with the iPhone 16. We believe Apple should benefit from generative AI as it will spur a meaningful iPhone upgrade cycle and create new avenues of monetization through its app store and advertising offerings. We believe this will support intrinsic value growth that will range between high-single-digits and low-double-digits over our investment horizon.”
2. Amazon.com, Inc. (NASDAQ:AMZN)
Short Interest as % of Shares Outstanding: 0.68%
Number of Hedge Fund Holders: 308
Amazon.com, Inc. (NASDAQ:AMZN) is a global technology company known for its various offerings in e-commerce, cloud computing, digital streaming, and AI. While it is widely recognized for its e-commerce platform and Prime membership, it has also made advancements in the 5G technology sector through its cloud computing arm, Amazon Web Services (AWS). It is one of the best 5G stocks to buy according to short sellers.
AWS provides a variety of solutions tailored for the development and management of 5G networks, including AWS Private 5G, Edge Computing for 5G, and AWS 5G Core Network Solutions. AWS Private 5G is a managed service designed to assist businesses in setting up, managing, and expanding their own private 5G networks on their premises.
In addition, AWS partners with telecom operators such as Verizon to aid in their 5G deployments. AWS also offers edge computing solutions, including AWS Outposts, which enable telecom providers to deliver computational power directly to businesses.
In the second quarter, 308 hedge funds had stakes in Amazon (NASDAQ:AMZN), with total positions worth $65.8 billion. As of June 30, Fisher Asset Management is the most significant shareholder in the company with a stake worth $8.46 billion.
Amazon (NASDAQ:AMZN) is well-positioned to capitalize on the growing need for cloud computing and data infrastructure, which are crucial for the expansion of 5G networks. As the adoption of 5G technology progresses, there is a rising demand for innovative cloud services and enhanced data processing capabilities, making AWS a key player in this space.
According to a media brand, CRN, AWS has a dominant position in the global cloud market, where it had a 31% share in the first quarter. This leadership is supported by the company’s extensive investment in product development, including custom AI chips and advanced software, which supports its growing role in AI cloud services.
Amazon (NASDAQ:AMZN) saw its total sales rise by 10% to $148 billion in the second quarter, with projections for the third quarter indicating a growth rate of 8% to 11%. AWS contributed $9.3 billion in operating income for the quarter, accounting for 63% of the company’s total operating income. CEO Andy Jassy highlighted that over the past 18 months, AWS has introduced more machine learning and generative AI features than all other major cloud providers combined. Furthermore, the company plans to invest nearly $150 billion in data centers over the next 15 years as it anticipates a surge in demand for AI cloud services.
Diamond Hill Capital stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2024 investor letter:
“Among our top individual contributors in Q2 were Amazon.com, Inc. (NASDAQ:AMZN), Texas Instruments and Mr. Cooper Group. Internet retail and cloud infrastructure company Amazon is benefiting from strong profitability, particularly in its Amazon Web Services (AWS) business. Shares also received a boost amid growing optimism around the demand for AWS as Amazon customers’ investments in generative AI projects continue growing.”
1. Arista Networks, Inc. (NYSE:ANET)
Short Interest as % of Shares Outstanding: 0.66%
Number of Hedge Fund Holders: 65
Arista Networks, Inc. (NYSE:ANET) is a prominent provider of cloud networking solutions and focuses on high-performance Ethernet switches and software tailored for extensive data centers and campus settings. The company is also a significant contributor to the 5G ecosystem, as it offers essential infrastructure that facilitates the deployment and functioning of 5G networks.
It provides high-speed networking platforms to leading telecom operators like SK Telecom, who use the company’s technology to develop resilient and scalable data center networks that can manage the increased data traffic associated with 5G services.
Among the company’s offerings designed for 5G networks and infrastructure are the Ethernet Universal Spine and Leaf Network Switches, the Extensible Operating System which streamlines network operations and ensures a uniform operational model across different platforms, the multi-domain management platform Arista CloudVision, and 5G Edge Solutions, among others. It tops our list of the best 5G stocks to buy according to short sellers.
Arista Networks (NYSE:ANET) stands to gain significantly from the ongoing expansion of 5G technology and the growing reliance on cloud services. As a key player in networking infrastructure, the company is benefiting from several industry trends, including the increasing number of data centers and the rise in internet-connected devices. This positions it favorably in the market, especially with its recent advancements tailored for AI applications.
The company’s new 7060X6 Etherlink AI networking platform is a great example as it is designed specifically to handle intensive artificial intelligence workloads. This platform facilitates the connection of multiple computer-processing units, which addresses a major challenge in the AI industry related to data processing. The company’s expertise in data center technology, particularly for AI, strengthens its role in the expanding AI data center market.
In its latest earnings report for Q2, the company achieved a revenue increase of 15.9% and a remarkable 29.5% rise in adjusted operating profits, surpassing market expectations. In light of the strong performance, on July 31, Jefferies analyst George Notter raised the price target on Arista Networks (NYSE:ANET) to $380 from $340 and kept a Buy rating. Notter’s optimism is supported by the company’s continued success in securing major AI and cloud networking trials. The company has won four out of five significant trials, with the potential for a fifth, possibly with Microsoft Corporation (NASDAQ:MSFT), as per the firm. This development suggests it could replace some of the existing InfiniBand solutions at Microsoft.
The company has set its revenue guidance for the upcoming quarter between $1.72 billion and $1.75 billion. This forecast represents an approximate 17% increase compared to the previous year, which signifies its growing presence in the AI hardware sector and its potential for continued success in the evolving tech landscape.
Arista Networks (NYSE:ANET) was part of 65 funds’ portfolios and the total stake value was $1.9 billion in the second quarter. As of Q2, Polar Capital is the top shareholder in the company and has a position worth $287.162 million.
Artisan Partners stated the following regarding Arista Networks, Inc. (NYSE:ANET) in its Q2 2024 investor letter:
“Notable trims in the quarter included Chipotle and Arista Networks, Inc. (NYSE:ANET). Arista Networks is the market leader in cloud networking equipment used in data centers. Shares have experienced strong outperformance since the beginning of 2023 due to its ethernet options being well positioned to capture market share in AI cloud environments (more scalable and cheaper than InfiniBand, an out-of-the-box solution by Nvidia). Similar to Chipotle, after a period of strong performance, we trimmed the position based on valuation and market cap.”
While we acknowledge the potential of Arista Networks, Inc. (NYSE:ANET) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for a promising AI stock that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
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