The tech world has seen a series of changes over the past decade, starting with the nationwide rollout of 5G networks and continuing with the current rise of generative AI. These technologies have impacted every segment of technology in ways that are still not fully resolved. Banking giant Goldman Sachs has taken a deep dive into how these changes are impacting the telecom industry and come to some interesting conclusions.
First, the bank points out that 5G’s main contribution has been to expand the scope of competition. It has not revolutionized the world as claimed, but it has expanded the scope of access to online networks, putting more customers within reach of telecommunications companies, particularly wireless network providers. Second, AI has created a voracious appetite for data center services, which in turn rely on high-speed connections and networks, opening up opportunities for network providers. In addition, AI technology promises to improve efficiency across the board.
James Schneider of Goldman Sachs said: “We believe the U.S. telecom sector is undergoing a transformation. U.S. telecom operators have refocused on their core businesses, having emerged from a conglomerate era marked by the destruction of shareholder capital. For the first time in a decade, we see U.S. wireless operators entering a period where competitive intensity and capital intensity are moderating simultaneously. We believe this environment supports healthier growth and margin dynamics, with the potential for significant capital returns and share price appreciation.”
We used the TipRanks Platform to get a broader idea of two names that the Goldman Sachs expert has designated as “leaders” in the telecommunications sector. These are well-known companies and, according to the analyst consensus, both have a buy rating. Here are the details.
Verizon Communications, Inc. (VZ)
Let’s start with Verizon Communications, whose slogan “Can you hear me now?” has become a meme. Verizon is one of the largest telecommunications companies in the United States, with a market capitalization of $173 billion and annual revenues of around $133 billion. The company is one of the three largest wireless service providers in the U.S. market, with approximately 114 million subscribers.
Verizon began rolling out its 5G network in 2019 and has been expanding ever since. The company backs its 5G operations with a strong spectrum position and extensive fiber optic cable network, and boasts the most reliable 5G carrier network in America. Verizon’s addressable market here is huge, as more than 200 million people live in areas covered by the company’s 5G service.
This large-cap telecommunications giant bills itself as a company dedicated to connecting people. In addition to its 5G and 4G wireless networks and fiber optic cable system, the company also offers public mobile computing solutions, leveraging both 5G connectivity and AI…
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