Profit from the Breakthrough in Liquid-Cooled Computers

When Ray Harroun came out of retirement in 1911 to race in the first Indianapolis 500, he made one request: He wanted to ditch the ride-along mechanic that the rules required in order to save weight and give his yellow Marmon Wasp a racing edge.

The Indy organizers balked: The mechanic provided a big measure of safety, they said, acting as a spotter who could watch for cars behind or on either side of the racer.

Harroun bolted a mirror to a bracket on his dashboard, was permitted to race without a mechanic, and won the inaugural Indy race - leading 88 of the 200 laps, the most of anyone.

And the rear-view mirror that Harroun used to gain an advantage in a car race? It's now standard safety equipment on motor vehicles of all types - meaning it occupies the ranks of devices or substances that were designed to solve one problem, but were later found to solve others just as well.

Today I'm going to share a similar story, and show you how a fluid developed to keep aircraft parts clean or suppress fires is being used to solve one of the biggest computer problems we face today.

And I'm even going to show you how to make money from it.

In the Age of the Internet, the invention of a high-powered computer known as a "server" is one of the things that have allowed our tech-oriented society to survive and thrive.

In a nod to our country's agrarian roots, these servers are packed into huge buildings, organized in neat rows just like the corn on a Midwest farm.

But that's where the agrarian similarity ends.

You see, as electronic circuits keep getting smaller, they make each server used for the Web and private computer networks much more powerful. But technology is just like finance in that there's no free lunch: This escalation in power and reduction in size creates a big problem.

I'm talking about heat.

These servers run very hot. And that, in turn, increases the odds of a server "meltdown," meaning the box just gets fried and becomes useless.

Right now, server farms rely on two main cooling sources.

The first is high-speed electric fans that blow air over the devices.

The second is executed by pumping lots of cold air into these huge rooms.

Trust me, you wouldn't want to have to pay the electricity bill for one of these facilities: Experts estimate that the U.S. alone spends roughly $7.4 billion a year cooling data centers.

Now you understand one of the key financial drains with all these server farms sprouting up all over the world.

But here's the thing: With every problem that needs solving, there's also a profit opportunity for the organization that devises the solution.

Enter Iceotope Research and Development Ltd. Their solution: keep computers cool by using a strange gooey liquid.

Don't scoff.  Liquids and sensitive electronic gear usually work together like a baseball and your neighbor's living-room window. But Iceotope has found a way for an alcohol-based chemical to keep all those circuits running cool -without the liquid damaging the complex electronic gear.

To achieve its results, the U.K.-based firm partnered with industry giant 3M Co. (NYSE: MMM). That big-cap leader has sold its Novec Engineered Fluid for at least two decades.

Because it isn't water-based - meaning it doesn't cause oxidation (rust) or other types of corrosion - the substance is often used by the military and aerospace firms as a parts cleaner. It also works great as a fire suppressant in rooms full of electronics because use of a water-based product there could ruin millions of dollars' worth of sensitive equipment.

But using it as a liquid cooling agent for computer centers is indeed a novel use of this substance. As such, I see this as just one more example of how we have entered what I call the "Golden Age of Materials Sciences."

If we're to maintain the rapid pace of innovation we've been experiencing, we have to keep finding new materials that can solve complex problems.

Or come up with unique new twists for already-existing chemicals.

That's why I think Iceotope is really onto something here. The result is a system that offers huge efficiencies.

Really, the stats are off the charts. Consider that Iceotope says its approach lowers data-center-cooling costs by 97%. That's pretty close to getting it down to free.

But that's not all - the firm says its approach lowers overall infrastructure costs for these centers by half and reduces the overall power load by 20%.

And the cooling system is only part of Iceotope's innovative package. There's also the "platform" itself. And it's pretty simple, combining a computer cabinet with a server module.

In turn, those modules can be set up for dedicated computing, or for telecommunications needs.

Iceotope is after two main markets. First, the cabinets can be designed as supercomputers. Those machines are used for such Big Data applications as searching through social networks, looking for the origins of the universe and catching terrorists before they strike.

Second, the boxes tap another major trend - cloud computing. That's because they can be wired into a series of server racks that comprise a full data center. This is a real growth area because hundreds of millions of mobile devices need to access the cloud for data, video and more.

So, Iceotope has great science, access to one of the world's top materials companies, and a couple of major tech trends going for it.

But it's also a private company, meaning it has yet to issue its stock to the public.

But don't worry about that - there are actually four ways to profit from this new field of "liquid-cooled computing."

First, there's 3M. The mega cap firm likely won't get a lot of sales from the Iceotope solution at this point.

But the breakthrough shows the firm can still remain on the leading edge of high tech at a time when materials science is so vital.

For its computer modules, Iceotope is working with Intel Corp. (NasdaqGS: INTC) and its arch rival - Advanced Micro Devices Inc. (NasdaqGS: AMD).

These two chipmakers couldn't be more different. Intel has a market cap of $107 billion, compared to $1.9 billion for AMD. Intel is clearly the more stable of the two firms.

In the past, I have described AMD's stock as a "bottom-feeder's dream." Trading at $2.60 a share, it's a risky play suited for aggressive investors.

Let me close by telling you about one other firm partnering with Iceotope. It's Super Micro Computer Inc. (NasdaqGS: SMCI), a maker of high-performance servers.

With a market cap of about $490 million, Super Micro trades at 10 times forward earnings and just 0.45 times sales at its recent share price of roughly $11.60.

With a consensus target of $15 - about 30% above where Super Micro is trading now - analysts seem to like the shares of this maker of energy-efficient computer servers.

It's impossible for me to predict at this point which of these stocks will have the best performance over the next couple of years.

But this much is certain. Liquid-cooled computing is an exciting new field that could have a dramatic impact on the entire field of computing, an area that touches just about every part of our lives today.

And just as Ray Harroun had no idea how much his invention would change the world that day in Indianapolis, there's no telling what other innovations this new data-farm technology will spawn.

Just know that when those innovations do appear, we'll be here to show you the best ways to profit.

[Editor's Note: It doesn't matter what's "hot" in investing, nobody is better equipped to than Michael to deliver "home run" gains in the tech sector.  And now for a limited time, you can get immediate full access to his Radical Technology Profits model portfolio for just $99.  But that's only a small part of this story. The same deal includes a " test drive" all of our premium services but one. That's $27,500 in research, for just $99! You can go here for the details]

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