Entrepreneurs are always looking for an edge – anything that can make them smarter, nimbler… and better.
In Silicon Valley, hardware manufacturers for decades have sought that "edge" in a high-tech axiom known as Moore's law.
This rule of thumb, proposed way back in the 1960s by Intel Corp. cofounder Gordon E. Moore, tells us that computing power doubles every two years or so. The reason is simple: As technical know-how and production methods get better and better, the number of transistors on integrated circuits doubles during that same two-year time frame.
That "law" puts one particular group of companies – semiconductor-equipment firms – in a very powerful position. And one specific company – Applied Materials Inc. (Nasdaq: AMAT) – just last week divulged an invention that's only going to add to its marketplace muscle.
This company is already a market leader, making it one of the best stocks to buy in the sector – and you won't find a better time to invest than now…
A Semiconductor Industry Surge
The semiconductor-equipment sector is very much a boom-and-bust cycle business.
And right now, it's booming.
The Semiconductor Industry Association (SIA) said worldwide sales of semiconductors reached $78.47 billion during the first quarter of 2014 – the highest ever total for the first three months of a year.
And when chip sales zoom, chip-making companies start investing in new equipment.
In fact, that's already happening.
SEMI, the trade group representing the producers of chip-manufacturing gear, says equipment makers signed $1.28 billion in orders in March, for a book-to-bill ratio of 1.06. That represents a year-over-year increase of 16.1%.
And it's not just the increases in volume that have chip-making firms boosting their spending.
Remember, chips just keep getting smaller, too.
And that means the production methods get more and more complex.
Consider, for instance, the tiny copper wires that connect all the transistors housed atop a microchip: As components get smaller and smaller – as projected by Moore's law – those copper-wire connections become increasingly problematic.
Last week, Applied Materials Inc. – one of the leading designers and manufacturers of chip-making gear – unveiled a new way to make these connections. It's the first industry improvement in this part of the production process in 15 years. And it means companies using AMAT's chip-making equipment will get a sought-after "edge."
And that will bolster Applied's marketplace muscle.
Plus, AMAT has a big announcement coming up in June – which is why it's on our "stocks to buy now" list… Here's what's ahead.
About the Author
Michael A. Robinson is one of the top financial analysts working today. His book "Overdrawn: The Bailout of American Savings" was a prescient look at the anatomy of the nation's S&L crisis, long before the word "bailout" became part of our daily lexicon. He's a Pulitzer Prize-nominated writer and reporter, lauded by the Columbia Journalism Review for his aggressive style. His 30-year track record as a leading tech analyst has garnered him rave reviews, too. Today he is the editor of the monthly tech investing newsletter Nova-X Report as well as Radical Technology Profits, where he covers truly radical technologies – ones that have the power to sweep across the globe and change the very fabric of our lives – and profit opportunities they give rise to. He also explores "what's next" in the tech investing world at Strategic Tech Investor.