We recently published a list of 10 Worst 5G Stocks To Buy According to Short Sellers. In this article, we are going to take a look at where Akamai Technologies, Inc. (NASDAQ:AKAM) stands against other worst 5G stocks to buy according to short sellers.
As we move a quarter of the way into the 21st century, the world is paving the way for new technologies to make human lives easier and more advanced. Out of those, 5G and artificial intelligence (AI) are two of the century’s most important innovations.
We discussed the correlation between the two of them in our article about the best 5g stocks to buy according to short sellers. Here is an excerpt from the article:
“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…
…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.”
The Outlook For 5G Industry
We also previously discussed the Market Research Future report which expects the 5G market to reach $229.41 billion by 2032, growing at a compound annual growth rate (CAGR) of 40.60% between 2024 and 2032.
According to a 5G Americas report, the wireless telecommunications sector continued to expand in the first quarter of 2024, driven by the widespread growth of 5G technology. Global 5G connections reached nearly two billion. North America’s leading adoption accounted for 32% of all 5G connections and added 22 million new connections, totaling 220 million. Latin America also experienced growth, with 8 million new LTE connections and 9 million 5G connections.
For the future, the 5G Americas forecast suggests that global 5G connections will reach 7.7 billion by 2028, with North America projected to have 700 million. The Internet of Things (IoT) is expected to further drive 5G adoption, with global IoT subscriptions expected to grow from 3.3 billion to 5 billion by 2028.
The Evolution of Mobile Networks with 5G Advanced and 6G
According to a March report by CNBC, telecom executives discussed plans for 5.5G or 5G Advanced at the Mobile World Congress in Barcelona, even as 5G is still being rolled out. The new stage of mobile technology is expected to enable advanced applications like mixed reality headsets, autonomous vehicles, and smart factories, which were initially promised with 5G.
The 5.5G technology will improve network capabilities by increasing data speeds and enhancing connectivity. It will also use AI to optimize networks and reduce power consumption. Huawei expects that 5.5G will begin commercial deployments by 2024, with the potential for much faster download speeds. The focus now is on improving 5G’s commercial relevance and paving the way for 6G in the future.
Moreover, a team of scientists, led by Professor Withawat Withayachumnankul from the University of Adelaide, has created a new polarisation multiplexer that could greatly improve 6G communications. The device works at terahertz frequencies, which are much faster than current wireless systems. It can send multiple data streams at the same time over the same frequency, effectively doubling the data capacity.
The multiplexer is built on a silicon base and has been successfully tested and reduces data loss compared to existing technology. The innovation could lead to faster, more reliable wireless networks and would benefit areas like telecommunications, video streaming, and future 6G mobile networks. The team expects it to drive more research and become available in commercial products within the next decade.
Our Methodology
To select the 10 worst 5G stocks according to short sellers, we used ETFs and screeners to identify over 40 stocks that have significant involvement in the 5G industry. Next, we narrowed our list to 10 stocks with the highest short interest. Finally, these stocks were ranked in ascending order of their short interest.
We also added 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).
A close-up of a person using a laptop with cloud solutions in the background.
Akamai Technologies, Inc. (NASDAQ:AKAM)
Short Interest as % of Shares Outstanding: 6.89%
Number of Hedge Fund Holders: 31
Akamai Technologies, Inc. (NASDAQ:AKAM) is an American technology company that specializes in content delivery networks (CDNs), cybersecurity, cloud services, and DDoS mitigation solutions.
The company operates a globally distributed server network that enhances digital content delivery for websites and web services. By using its sophisticated edge computing platform, it provides fast, secure, and reliable access to online resources, which helps businesses scale their operations and optimize user experiences.
Akamai (NASDAQ:AKAM) is revolutionizing 5G security through its Carrier Mobile solutions. It helps businesses secure their networks in a mobile-first world. While 5G is revolutionizing the world, it also brings security challenges, including a rise in mobile phishing attacks and the vulnerability of IoT devices, which often lack strong security features.
The company addresses these challenges by offering enterprises secure private network slices, which allow businesses to shield their mobile and IoT devices from risks associated with public mobile networks and minimize vulnerabilities.
Akamai (NASDAQ:AKAM) security solutions help enterprises maintain control over their networks, which provide comprehensive protection for both employees and IoT devices. This empowers businesses to embrace 5G while mitigating the associated risks.
While Akamai (NASDAQ:AKAM) is a 5G stock with some of the highest short interest rates in the 5G segment, analysts seem to disagree with the sentiment. The company’s delivery services have been facing challenges due to macroeconomic conditions and geopolitical factors, which have impacted its growth in recent quarters. However, its reinvestments in growth areas offset those concerns.
On August 29, TipRanks reported that Tigress Financial analyst, Ivan Feinseth reaffirmed his Buy rating for the company with a price target of $140. He highlighted that the company’s successful shift towards becoming a major provider of cloud-based security services is helping mitigate the decline in its content delivery segment.
Feinseth noted that the company’s integration of Edge Compute solutions is driving growth, supported by increased demand for cloud, Edge, and distributed computing. He also mentioned Akamai’s (NASDAQ:AKAM) strong financial position, with healthy cash flow and a solid balance sheet, which allowed the company to invest in growth and pursue share repurchases.
In the second quarter, 31 hedge funds had stakes worth $361.203 million in Akamai (NASDAQ:AKAM). As of June 30, Alyeska Investment Group owns 1.13 million of the company shares worth $102.1 million and is the most prominent shareholder of the company. The most prominent short positions in the company have been held by Citadel Investment Group and PEAK6 Capital Management, worth $35.9 million and $27.9 million as of Q2, respectively.
Diamond Hill Long-Short Fund stated the following regarding Akamai Technologies, Inc. (NASDAQ:AKAM) in its fourth quarter 2023 investor letter:
“Akamai Technologies, Inc. (NASDAQ:AKAM) is a legacy content delivery network (CDN) solutions provider which management has recently pivoted to enterprise and network security as well as distributed cloud computing. However, these markets are intensely competitive, and Akamai has yet to prove it can differentiate itself from cloud hyperscalers and best-of-breed security companies.”
Overall, AKAM ranks 2nd on our list of 10 worst 5G stocks to buy according to short sellers. While we acknowledge the potential of AKAM as an investment, 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 an AI stock that is more promising than AKAM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.