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Increasing focus on cloud computing, network security, big data, and cloud storage is expected to boost the performance of the computer networking industry. The accelerated deployment of 5G is driving the proliferation of the Internet of Things (IoT), Advanced Driver Assistance Systems (ADAS), Augmented Reality/Virtual Reality (AR/VR) devices, and 5G smartphones, calling for solid networking infrastructure.

This has spurred demand for networking products, favoring the prospects of prominent industry players like Cisco, Extreme Networks, and RADCOM Ltd. However, negative impacts stemming from lingering supply chain disruptions and component shortages will likely be a concern in the near term. Weak global economic conditions and rising inflation are also likely to act as additional headwinds.

The computer networking industry comprises companies that offer networking and internet-connected products including wireless (WiFi and LTE), Ethernet, and powerline, focusing on dependability and ease of use. These products are available in numerous configurations to cater to the changing requirements of consumers in each geographic territory where they operate for smooth network connectivity and broadband access.

Some industry players also provide mission-critical IoT solutions and network security services to help clients build next-generation connected products and implement and manage critical communications infrastructures in demanding environments with enhanced levels of safety. Focus on developing IoT sensors, drones, and wearables amid increasing demand for cloud computing-based contact tracing applications is driving the industry.

Four trends are influencing the industry’s future. The first trend is the rapid deployment of 5G, which is expected to boost growth prospects. The second trend is the uptick in Wi-Fi 6 networking, which is driving momentum in the industry. The third trend is innovation in networking technologies, which is opening new business avenues. The fourth trend is the increase in IT spending, which bodes well for industry participants amid economic turmoil.

The computer networking industry has outperformed the S&P 500 composite and the broader computer and technology sector in the past year. It is currently trading at a lower valuation compared to the S&P 500 and the sector’s forward-12-month P/E.

Three networking stocks to keep an eye on are Cisco, Extreme Networks, and RADCOM Ltd. These companies provide networking solutions and are well-positioned to benefit from the industry’s growth prospects.

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