Invesco Next Gen Connectivity ETF (KNCT)

The Invesco Next Gen Connectivity ETF (KNCT) invests in the companies building the next wave of global communications infrastructure. The fund tracks an index of telecommunications and technology companies involved in 5G networks, fiber-optic deployment, satellite broadband, wireless-network equipment, and related connectivity technologies. These are the companies providing the plumbing that powers modern communication — not the telecom carriers themselves (which own customers and charge for service), but the equipment makers, infrastructure deployers, and technology providers who build the physical and electronic foundations that make wireless and wireline networks possible.

The genesis of a connectivity boom

The need for KNCT arose in the late 2010s as the world began to recognize that 5G — the next generation of wireless technology — was not merely an incremental step from 4G, but a catalyst for a decades-long infrastructure upgrade cycle. A 4G network is optimized for smartphones and modest data speeds; 5G is designed to support autonomous vehicles, industrial sensors, virtual reality, and the vast network of Internet-connected devices that enterprise customers increasingly demand. Building a 5G network is not an overnight project: it requires replacing radio-access equipment across cities and towns, adding fiber-optic backhaul to carry the traffic, deploying new spectrum, and integrating software and hardware in ways that were not necessary in the 4G era.

At the same time, satellite-broadband companies and fiber-to-the-home operators were gaining momentum. SpaceX’s Starlink and others saw an opportunity to serve rural areas where traditional carriers had no incentive to build. Fiber deployments accelerated as cities and private companies recognized that fiber is the future backbone of all networks. These parallel trends — 5G rollout, satellite broadband expansion, and fiber ubiquity — created a structural tailwind for the companies that make the equipment and deploy the infrastructure.

Invesco’s response was to create a fund focused explicitly on this connectivity buildout. Rather than force investors to sift through telecom and technology indices to find the relevant companies, KNCT isolates the sub-segment of the market that benefits most directly from the decision, made by hundreds of governments and thousands of private companies, to invest in next-generation connectivity.

Who is in the fund

The index includes network-equipment manufacturers such as Nokia and Ericsson (whose radio-access equipment is installed in 5G networks worldwide), semiconductor and chip companies whose processors power network gear, fiber-optic cable and hardware suppliers, satellite-broadband operators, infrastructure-deployment companies, and telecom-infrastructure specialists. The fund avoids pure telecom carriers (which operate the networks and sell service to customers) because their fortunes depend on pricing power and customer acquisition, not on the infrastructure buildout itself. It also avoids consumer-electronics companies that use connectivity as a feature.

The specific holdings evolve as technologies mature and new players emerge, but the principle is constant: companies winning because the world is spending money on the physical and electronic infrastructure of next-generation connectivity.

The tailwind and the risks

The case for the fund rests on a simple premise: governments and private companies will continue to spend enormous sums upgrading network infrastructure, and that spending will benefit the companies that supply the equipment and services. This is not a guess — governments have already committed to 5G infrastructure spending, and the rollout is ongoing. Similarly, the satellite-broadband opportunity is beginning to materialize as Starlink proves the concept and governments seek rural connectivity solutions. Fiber expansion is accelerating as gigabit internet becomes a standard rather than a luxury.

This creates a multi-year, arguably multi-decade tailwind. Unlike a smartphone market that matures and plateaus, infrastructure buildout tends to be lumpy but relentless: upgrades that begin in wealthy nations spread to emerging markets, new standards create new rounds of investment, and the installed base of connected devices keeps growing, requiring more capacity.

The risks are real. First, many of the companies in the fund are cyclical: when capital expenditure by carriers and governments slows, so do orders for network equipment. An economic downturn that freezes infrastructure budgets would hurt the fund. Second, competition is fierce; no single company dominates every segment, and over-capacity in some categories (like fiber deployment) can pressure margins. Third, geopolitical tensions around telecommunications equipment — particularly competition between Western and Chinese vendors over 5G — could result in supply-chain disruption or political barriers that make certain companies’ products less attractive in some regions. Fourth, the premise itself could shift: if a new, simpler standard emerges, or if the returns on next-generation connectivity prove disappointing, capital reallocation could slow faster than the fund’s structure expects.

Trading and cost structure

KNCT trades on NASDAQ during regular market hours like any other ETF. The expense ratio is moderate for a thematic or specialized fund — higher than a broad market-cap-weighted index but lower than many actively managed connectivity funds. Because the underlying holdings are equities, the fund generates ordinary capital gains and dividends, with no special tax treatment.

The fund rebalances periodically to maintain its index weighting, which can incur transaction costs, but Invesco structures most ETF rebalancing to minimize tax leakage for shareholders.

How to research the fund

Start with Invesco’s fact sheet and prospectus, which name the top holdings and explain the selection methodology for the underlying index. Holdings in a connectivity-focused fund should skew toward network infrastructure companies, equipment suppliers, and satellite-broadband operators rather than carriers. Look at the concentration: if the fund is 30% Nokia and Ericsson, it is more cyclically dependent on 5G spending specifically. If it is more diversified across many smaller players, it is wider but potentially less pure.

Understanding the fund’s performance through different phases of 5G rollout is instructive. In years when carriers are aggressively deploying new 5G gear, the fund tends to perform well; in years when rollout pauses or carriers shift focus, it can lag. Compare the fund’s returns against a broad technology index to see whether it genuinely captures a distinct infrastructure-buildout tailwind or whether it simply moves with the broader tech cycle.

Finally, research the regulatory environment in major markets. Changes in which vendors are allowed to supply 5G equipment, or shifts in government infrastructure spending, can materially affect the long-term case for connectivity infrastructure funds. KNCT is a tool for investors convinced that connectivity spending will remain robust; it is not a defensive holding and should be sized accordingly in a diversified portfolio.