Top network IT investments include 5G, smartNICs, cloud

Historically, the networking market has been an outcast in terms of investments, Silverstein said. While many investors expected the market to crater during the peak of cloud hype, networking margins have continued to rise. One reason for the uptick is enterprises still need on-premises mainframes and workloads, said Rod Hall, managing director and senior equity analyst at Goldman Sachs. And, thanks to advances in cellular technology and silicon, the networking market touts some promising areas for IT investment.

5G

Operators and service providers are investing in communications equipment, a point noted One such focus is 5G infrastructure, as operators like ATT, T-Mobile and Verizon build out their 5G networks. Verizon, for example, recently announced it was selling its media group for $5 billion, enabling it to invest more in its 5G mobile network. Meanwhile, T-Mobile announced it expects to spend $11.7 billion to $12 billion on 5G in 2021.

These spending plans foreshadow promising market growth over the next couple years, according to the analysts.

“We’re excited about increases in Capex spending on 5G, combined with changes in how we’re plumbing data centers now, increasingly at the edge,” Chahal said.

SmartNICs

Those data center networking changes include an emerging market: smart network interface cards (smartNICs). While the smartNIC market is still nascent, smartNICs present compelling benefits Previously, NIC silicon didn’t have enough processing power to run functions like load balancing and encryption. But, as networking has veered toward software, semiconductor manufacturers have boosted NIC processing capabilities, opening opportunities for more efficient enterprise networking at the server level, similar to what hyperscale cloud providers have done for years, Chahal and Subrahmanyan said.

These silicon advancements are vital in a software world because, without sufficient processing power, the value isn’t there for networking, Silverstein said.