Information Technology Concept Stocks Investment Guide: Industry Outlook and In-Depth Analysis of Leading Companies

Development Opportunities in the Information and Communications Industry

As global broadband infrastructure investment expands, ICT concept stocks are迎來 development opportunities. The US government plans to invest $42 billion in nationwide high-speed broadband network construction, and the EU region is also actively promoting related infrastructure upgrades. According to Dell’Oro data, the global communication equipment market size in 2022 has approached $102 billion, achieving five consecutive years of growth, and is expected to surpass the $120 billion mark by 2025.

This investment boom has directly driven the performance of ICT concept stocks. Since 2023, the relevant concept stock index has risen over 35%, significantly outperforming the broader market.

What are ICT Concept Stocks?

ICT (Internet Communication Technology) refers to hardware devices and technology industries related to internet connectivity. Common ICT devices include routers, set-top boxes, etc., and ICT concept stocks refer to stocks of listed companies whose business is closely related to network communication.

The industry chain distribution is extensive:

• Upstream: Communication terminal component suppliers, including microprocessors, network ICs, plastic/metal casings, passive components, etc.
• Midstream: Network equipment manufacturers and related component suppliers.
• Downstream: End-user application product providers, such as wireless communication equipment, wired communication equipment, optical communication devices, and telecom service providers.

With the rise of 5G and IoT industries, the entire ICT industry is rapidly developing, with all segments of the industry chain showing growth trends.

Analysis of Leading US ICT Companies

In recent years, US ICT stocks have shown mixed performance, with overall volatility. Here are five key leading companies in the market:

Cisco (CSCO)

As a globally renowned network equipment manufacturer, Cisco mainly engages in the sales of network software and hardware, including switches, routers, and other products. Its Q2 2023 financial report shows revenue of $15.2 billion, up 16% year-over-year, with all indicators exceeding market expectations.

Benefiting from the continuous increase in AI-related orders, investors have high expectations for its AI development potential. Since the beginning of the year, its stock price has risen over 16%, with recent strong performance.

Arista Networks (ANET)

This company focuses on designing and selling multi-layer network switches and related software. Its Q2 2023 financials show revenue of $1.46 billion, with EPS of $1.58, both surpassing market expectations.

Notably, nearly half of its revenue comes from large tech companies like Microsoft and Meta. Driven by the AI wave, its sales are expected to continue growing. This year, the stock has surged over 50%.

T-Mobile (TMUS)

As the third-largest telecom operator in the US, T-Mobile mainly provides communication services and mobile phone sales. Its latest financial report shows 760,000 new phone users in Q2, exceeding market expectations and leading over competitors AT&T and Verizon.

Since entering 2023, the stock has experienced a consolidation phase, but its fundamentals remain solid.

Broadcom (AVGO)

Broadcom is a global leader in communication chips, dominating in areas such as switching and routing chips, Wi-Fi chips, etc. According to Linley data, it held a 70% market share in Ethernet switching chips in 2021.

Benefiting from the AI boom, Broadcom’s revenue continues to grow. Its expected revenue for Q2 and Q3 2023 exceeds market expectations, with the stock price up over 55% since the start of the year.

Qualcomm (QCOM)

Qualcomm enjoys a strong reputation in mobile communication, mainly designing and manufacturing chips for smartphones, tablets, and mobile devices. Although its stock has experienced volatility this year due to performance issues, the company remains a leader in 5G.

It is noteworthy that Qualcomm plans to collaborate with Meta in 2024 to introduce generative AI features into smartphones, which could help it rebound by riding the AI wave.

Key Indicators Comparison of Leading US ICT Stocks:

Analysis of Leading Taiwanese ICT Companies

Since 2023, the Taiwan Communications Network Index has risen over 35%, outperforming the broader market significantly. Among Taiwan ICT concept stocks, the following five companies are most worth watching:

Chunghwa Telecom (2412)

As Taiwan’s largest telecom company, Chunghwa Telecom’s business covers fixed-line communication, mobile communication, broadband access, and internet services. In the first half of 2023, EPS reached NT$2.52, hitting a six-year high.

The company has paid dividends for 26 consecutive years and is known among retail investors as a “fixed deposit stock” due to its stable dividend policy. As of June 2023, it paid a cash dividend of NT$4.7.

Delta Electronics (2308)

Delta Electronics is a leading enterprise in Taiwan’s power supply industry, covering power supplies, components, automation, and communication infrastructure. It also holds multiple concept stock identities, including ICT, AI, and electric vehicles.

In Q2 2023, revenue exceeded NT$100 billion, up 11.7% year-over-year, with net profit after tax of NT$15.056 billion, up 10%. The CEO stated that operations in Q3 are expected to be stable and growing compared to Q2. Driven by strong fundamentals, the stock price has continued to rise, up over 20% since the beginning of the year.

FarEasTone (4904)

FarEasTone is one of Taiwan’s three major telecom operators, mainly engaged in telephone services, wireless communication equipment, and related parts installation. In Q2 2023, benefiting from 5G user upgrades, revenue reached NT$21.7 billion, up 4.7%, with net profit after tax of NT$2.8 billion, up 19.7%.

The company has paid dividends for 24 consecutive years, with a dividend of NT$3.25 in July 2023. Its stock price has increased over 7% since the start of the year.

Chungwa Telecom (2345)

Chungwa Telecom is a major network switch manufacturer, with about 70% of its business coming from switch products, mainly serving large international enterprises. In the first half of 2023, EPS reached NT$7.67, a record high, with revenue and profit maintaining double-digit growth.

As shipments of 400G switches continue to increase, market expectations suggest its performance will remain high. Since the beginning of the year, the stock has surged 93%.

Qisda (6285)

Qisda is a satellite communication giant, mainly engaged in network communication, automotive/modules, and antenna solutions. The US market accounts for 66%, making it a direct beneficiary of US broadband infrastructure investments.

In Q2 2023, revenue was approximately NT$26.63 billion, up 31.98%, setting a new record. Driven by demand from European and American telecom operators, revenue is expected to further strengthen. Since the start of the year, the stock has risen over 60%.

Key Indicators Comparison of Leading Taiwanese ICT Stocks:

Advantages and Risks of Investing in ICT Concept Stocks

Investment Advantages

Strong Policy Support: Broadband infrastructure has significant social and economic value, and most governments worldwide have introduced supportive policies. The US plans to invest $42 billion in broadband infrastructure, and the seven major industrial countries in the EU are expected to invest $6 trillion, aiming for household internet speeds of 1G by 2030.

Relatively Stable Operations: Traditional ICT giants are less affected by economic cycles, with relatively stable revenue and profits, enabling them to continue paying high dividends, attracting long-term investors.

Multiple Concept Advantages: Many ICT concept stocks also carry other popular concepts like 5G and AI. When tech-related concepts take off, these multi-concept stocks often attract more capital.

Potential Risks

Limited Growth Space: Unlike concepts like AI with huge imagination space, the growth potential of ICT concept stocks is relatively limited. Most developed countries’ network infrastructure is saturated, and the construction speed of 5G and 6G is relatively slow.

Intense Industry Competition: Due to numerous market participants, competition among ICT companies is often fierce. To win orders, companies are often forced to lower prices, which can pressure profit margins.

Investment Recommendations for ICT Concept Stocks

Prioritize Multi-Concept Stocks: When selecting ICT concept stocks, prioritize those with multiple concepts like 5G and AI, as these stocks tend to outperform single-concept stocks.

Long-term Investment in ETFs or Funds: Compared to individual stocks, ETFs or mutual funds can diversify risk. Examples include Global Future Communications ETF, iShares US Telecom ETF, etc.

Focus on Company Fundamentals: Whether short-term or long-term, investors should pay attention to financial statements, profit growth, cash flow, and industry position.

Summary

ICT concept stocks cover various related fields such as network equipment manufacturing, communication chips, and telecom services. Leading stocks in Taiwan include Chunghwa Telecom and Chungwa Telecom, while in the US, Cisco and Arista Networks are prominent. With increased global broadband infrastructure investment, the deepening of 5G and IoT industries, and government policy support, the ICT industry faces promising development opportunities. Investors can allocate according to their risk tolerance and investment horizon.