As I predicted in my 2017 outlook a few weeks ago, tech is off to a screaming start to the year. The tech-centric Nasdaq is up close to 3.2% versus the S&P 500’s 1.45%.

Here’s the key: As the years go by, Silicon Valley will be providing more and more of the technology that’s becoming critical to our society’s existence, like broadband and mobile communications, wearable tech, sensors, virtual and augmented reality, and medtech.

[ad#Google Adsense 336×280-IA]But here’s the thing.

Virtually none of that can exist without the fundamental component I’m going to tell you about right now.

It’s absolutely indispensable to innovation, miniaturization, mobilization, and utilization.

This little part enables the global spread and adoption of technology – and you bet it enables massive tech profits, too.

So the play I have in mind has lots of upside wired in.

The Tech That Makes Tech Possible

Look, the pace of technological advance has been lighting fast over the past 60 years.

And it’s only going to get faster.

That’s largely thanks to the exponential acceleration of computing speed. Consider that on your wrist or in your pocket right now, you’re likely packing several tens of thousands of times the computing power of the Apollo craft that landed on the moon – not to mention the computers NASA used to pull it off!

sharesIn 1995, humans were producing about 100 gigabytes of data every day – far, far less than the 16-terabyte capacity of our newest hard drives in 2017.

What’s more, by 2018, humans and their machines, large and small, will likely generate close to 50,000 gigabytes every second. That comes to 4.5 exabytes – that’s 4.54 quintillion bites – of data every day, in everything from text messages, to emails, to love notes, to doctoral dissertations, Internet traffic, grocery lists – and on.

And only hyperfast computers are capable of handling that eye-watering supply of 0s and 1s.

In real time, no less.

That’s where my recommendation comes in. They’re consistently innovating and improving computer processors, and they’ve been at it for a while, too.

They’ve got the microchip game covered front to back.

Put “Intel Inside” Your Core Tech Holdings

All of the incredible progress and achievement in processors, stunning and disruptive as it has been, is only laying the foundation of what’s coming just around the corner…

Driverless cars, smart houses, interconnected devices, cybernetics, artificial intelligence (AI), smart clothes with sensors, and virtual reality surgery are all coming – some prototypes are here already – and they all depend on the chips made by Intel Corp. (Nasdaq: INTC), and others.

Now, of all the great chipmakers out there, come-from-behind Intel is one of the biggest and best bets for your core technology holdings.

Why I’m Recommending Intel Today

Just a few years back, Intel looked to be stuck with the short end of the stick. It relied heavily on server, desktop, and of course, laptop sales right as the mobile wave was hitting.

But it’s really amazing what new, fresh leadership can do. Rule No. 1 of my “Tech Wealth Blueprint” holds that great tech firms have great operations. Great operations just aren’t possible without standout CEOs… and Intel honcho Brian Krzanich is one of the greats.

The trained chemist is a rabid tech enthusiast who holds a patent for semiconductor processing himself, and he can frequently be found scouting the field at Intel-sponsored “hackathons” (think “talent shows” for techies).

He’s put Intel out ahead of an extremely fast-moving curve – the “Internet of Things,” a concept – fast becoming a concrete reality – based on billions of small, connected devices all communicating.

It sounds fantastic, but it’s fast becoming a fact of life – a device like a toothbrush that can tell you whether or not your kids actually brushed before bed, or a house you can “talk” to on your way home from work and instruct it to turn the heat or air conditioning on or chill down a bottle of your favorite California white to a perfect 49° F.

Intel is simply dominant in the Internet of Things sphere, and it’s making almost everything we touch every day smarter and more useful.

This Isn’t Just About Smaller and Smarter

Smaller, faster chips are important, but Intel is improving them in other ways. Like flexible circuit boards that are actually washable or that power themselves through your movements, like an automatic watch does.

I’m talking about weaving computers into textiles. Some of the markets biggest players in the consumer goods space – Adidas AG (OTCMKTS: ADDYY), Nike Inc. (NYSE: NKE), Alphabet Inc. (Nasdaq: GOOGL), Apple Inc. (Nasdaq: AAPL), and Samsung Electronics Co. Ltd. (OTCMKTS: SSNLF) – are already “shoulder deep” in the smart clothing segment.

What’s more, the company has recently launched a new venture it calls Project Alloy. If you’re familiar with virtual reality (VR) rigs, like Facebook Inc.’s (Nasdaq: FB) Oculus Rift, or HTC Corp.’s (TPE: 2498) Vive, or Sony Corp.’s (NYSE ADR: SNE) PlayStation VR, then you have an idea of what Intel is up to here.

But there are a couple of unique and, I think, potentially lucrative differences.

The first is, Intel is building its own device. This is a first for Intel, even accounting for laptops and servers. It’s normally been content to build the best chips on the market and leave the hardware for others. No longer.

Furthermore, Project Alloy is more than “just” VR. This is even bigger and more comprehensive than virtual or augmented reality; it’s “merged reality.”

You see, VR basically immerses you in the world that “lives” in your particular VR headset. It’s astonishing, and I’d urge every single one of my readers to try it the first chance they get – if they haven’t already.

But “merged reality” is something else again. It puts virtual objects into your real, physical environment and enables you to interact with them via movements or voice commands…

Pick up a pencil, and it becomes a tennis racquet. Open a door in your house, and enter a new dungeon in a game you might be playing. Read a “newspaper” that exists only in a virtual sense, and flip the pages with your hand or flick of your finger. It’s an extremely advanced, though extremely pragmatic, approach to reality.

Intel has merged its RealSense visual computing technology, which allows computers to figure out where you are and what you’re doing and wrap it in an AR format. For example, you can put RealSense cameras on drones and they can self-navigate around objects or identify specific objects.

Because Intel is coming at this new interface from the computing end of things, instead of the gaming end of things (like Facebook) or the software end of things (like Microsoft), Intel has been able build its Project Alloy from the ground up, with its own hardware.

That should make the system more robust and integrated.

Once Project Alloy is ready – Krzanich expects that to be this year – Intel will open source it and let the developers run wild with the idea; Intel is not as focused on peripheral products as its competitors.

The Next Decade Looks Even Better

The Internet of Things and Project Alloy are huge assets for Intel, but it’s not resting on its laurels with these breakthroughs.

It’s working hard for more…

Euclid, for instance, is a new self-contained computer built to “drive” robots, opening the door to turnkey or plug-and-play robot kids. It’s got “Intel inside,” and BMW AG is working with Euclid on its own self-driving car project.

In an intriguing and potentially very lucrative move last March, Intel also purchased an Israeli company, Replay Technologies. It features 360-degree replay technology and was already used by the National Basketball Association (NBA) to show replays during games. It can freeze the action and change the view – as well as show the images in three dimensions (3D).

It basically weaves together, seamlessly, the images from a number of high-definition (HD) cameras. Then those images can be manipulated.

Remember, the “Big Four” American sports leagues are worth more than $31 billion in revenue alone – and climbing. This is a fast-growth sector, and the competition for viewers is fierce. My decades spent reporting in tech tell me Replay is going to be a major disruptor in that competition.

CEO Krzanich describes its potential beyond sports, as well:

“We’re finding the applications for this are quite large when you fully digitize the real world and allow yourself to manipulate and work within it.” For example, a mystery movie shot using this tech “might position the murder scene from different angles depending on who you are – including the victim.”

All this bodes extremely well for Intel’s business prospects. I couldn’t be more excited to recommend these shares.

All This Growth Potential, and a Dynamite Stock, Too

But what really matters is how it looks from an investment perspective.

And there, Intel continues to impress. It’s up 23% on the year, with a durable dividend that is still paying investors 2.8%, even after that run.

Its net profit margins were 21.4% as of September 2016, up from just under 10% in June, and analysts are expecting it to remain a healthy 20.6% when it announces Q4 earnings this week on Jan. 26. Its operating margins are in a similar uptrend. Its net operating margins and net profit margins continue to rise. And its P/E ratio of 17.23 makes it a must-buy bargain compared with other chipmakers out there, as well as the broader Nasdaq.

Revenue was up 9% in Q3 2016 year over year, as were earnings. As I expected, top-line growth in its Data Center Group (up 13%) and Internet of Things Group (up 20%) powered those numbers.

The stock has been consolidating for the past six weeks, so this is a great time to take advantage in the lull and buy Intel at market. Buy it [today], and you’ll likely lock in even more upside before it takes off after earnings.

— Michael A. Robinson

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Source: Money Morning