The interesting thing about the computer chip market is that it can’t look at current trends. You have to look at what it will be hot in the future.
Of course, what will be hot in the future is a no-brainer. We are talking about two major trends. First, there will be a continued expansion of wireless mobile devices. I am of course talking about smartphones and tablets. Chips that power those devices are going to be in much bigger demand, and the companies behind those chips will see a brisk business long into the future. Look for companies that specialize in those kinds of chips.
Another kind of chips that would be very big in the future is chips used in data centers and networking. These chips would be important because cloud computing is a key part of the future made possible by the explosion in wireless mobile devices.
These two trends are interrelated. They feed off each other, and they give you a clue as to which hardware chip companies would stand to benefit from this tremendous sea change that we’re going through. Only ten years ago, it seemed that the future of desktops and laptops was secure—not anymore. In fact, desktop computing has registered quarter after quarter decline. The decline may be a little bit slow, but it’s a pronounced trend. The future is wireless, mobile, and uses smaller screens and the overall cost factor is lower too.
If this is the case, one key chip maker that you might want to look into is Avago Technologies (NASDAQ:AVGO). This company produces data center chips and a supplier to Apple (NASDAQ:AAPL). Moreover, many analysts say that this company would be a very big beneficiary of the exploding 4G LTE wireless market in China. It looks like Avago’s chips are in the right market at precisely the right time.
According to analysts’ consensus, this stock is going to be worth around $138. Currently, it is already trading over $130 or thereabouts. If that isn’t enough to get you excited about this company, please do keep in mind that this company is one of those rare technology companies that pay a dividend. At its current price, its dividend comes in at around 1.17%.
