Four Companies Across Three Tech Sectors that You Need to Follow Closely
Jayson is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
In 2003, laptops outsold desktop computers for the first time ever. This was just ten years ago, and so much has changed since. Technology trends are rapidly changing and it can be difficult for investors to keep up. Are desktop computers still relevant? Are tablets a "fad," or are they here to stay? These are the questions that investors need answered to make solid tech investment decisions.
PC demand is weak
Demand from the PC end market remains soft as Intel’s (NASDAQ: INTC) new Haswell processor is not driving incremental demand. Touch-enabled PCs are still too expensive, while tablets and smartphones continue to cannibalize PC demand. Despite the fact that the Haswell microprocessor enables higher performance at lower power, demand for PCs is just not improving. Historically speaking, new processor launches have not resulted in higher PC demand.
The writing is on the wall for Intel; it is too heavily exposed to a dying product. The company is making gains in tablets, but nowhere near enough to offset the PC decline. The company’s guidance for growth in the second half of 2013 and beyond is at risk, and as a result I believe the stock is vulnerable to downside.
Two companies that stand to benefit from growth in tablets
Broadcom continues to strengthen its position in connectivity, with combo connectivity solutions already in mass production for the iPad 4 and iPad Mini, Galaxy Tab, Kindle Fire HD and Nexus 7 devices. Broadcom should continue to be the combo connectivity chip of choice in future versions of these platforms.
As for Nividia, the Tegra apps processor has been gaining traction in tablets, with recent design wins on the Nexus 7 and Surfice Win RT tablet among many others. The company recently launched its latest-generation Tegra 4, a quad-core ARM Cortex A15-based processor. The Tegra 4 has won more new designs than the company had in total with the previous generation Tegra 3. The shipping of production volumes of Tegra are scheduled to begin at some point in the second quarter 2013.
A fast-growing and significant player in cloud storage
Amazon’s (NASDAQ: AMZN) We Services (AWS) segment is becoming a fast-growing and significant player in the cloud storage and computing space by offering both large and small businesses on-demand utility computing that can easily scale to a client’s needs. AWS offers a complete set of infrastructure and application services that enable a business to run several applications in the cloud, with 33 services spanning computer, storage, and database and application management.
AWS is a real game changer for smaller Internet players that don’t have the resources to invest in a large server infrastructure. Analysts at J.P. Morgan believe the AWS segment represents a $2.85 billion industry in 2013, growing 62% year-over-year with high growth rates for the next several years as the company penetrates the large cloud computing opportunity. AWS will also boost the company’s gross profit and margin as the company is likely to continue to competitively price it in order to establish market dominance.
I presented four companies that either stand to benefit or lose out from future trends within the technology sector. Not only do we know the future trends in the industry, but we know who the major players will be and, in the case of Intel, won’t be. Amazon’s high share price shouldn’t deter investors, though Nividia and Broadcom are trading at a substantially cheaper per-share price and trading at a discount when factoring in their true potential in the industry.
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Jayson Derrick has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Intel, and NVIDIA. The Motley Fool owns shares of Amazon.com and Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!