Security, Storage and Cloud Technologies to Drive These Chip Stocks Higher

The slow, but steady gains in personal computer (PC) sales have helped some old-school names in the chip industry make a nice comeback over the past year. The problem is PC sales have historically been like car sales, they are cyclical and tend to rise and fall with the economy and overall demand. The real driving force in the industry going forward is security, storage, cloud technology and virtualization.

A new research report from the chip analysts at UBS points out that chip sales have historically tracked S&P profit trends. That is a key factor as margins are above 2010 levels for the major corporations, yet chip sales versus earnings continued to decline since then. The trend has reversed, and with solid growth from PC sales, combined with new technology needs and the upcoming iPhone 6 release, things are very bright for the top chip companies.

UBS has rated six chip stocks as a Buy. Aggressive growth investors looking to add a technology component to their portfolios may want to consider adding one or more of these top companies.

Intel Corp. (NASDAQ: INTC) has a Buy rating at UBS and has turned the corner after years of sideways and disappointing progress for investors. A new commitment to smartphone and mobile applications, combined with the resurgence of PC growth this year, has made Intel one of the best large cap value stocks to buy. Intel trades at 15 times forward earnings, more than in recent years, but still a reasonable multiple for investors looking for growth.

Intel shareholders are paid a solid 2.6% dividend. UBS has a $37.50 price target, while the consensus target is posted at $33.75. Intel closed Wednesday at $34.57 a share.

READ ALSO: Merrill Lynch Says Tech Hardware Still the Stocks to Own in 2014

Micron Technology Inc. (NASDAQ: MU) posted very solid earnings for the second quarter, and the stock was promptly down, though it has rallied back strong. The company, which is a leader in DRAM chip sales and is one of the top UBS memory picks, has seen a nice streak of beating earnings estimates, especially when looking at the previous two reports. Micron beat estimates by at least 35% in both cases, suggesting it has a nice short-term history of crushing expectations. With a looming memory shortage, the stock could have serious upside potential.

The UBS price target for Micron is $35, and the consensus target for the stock is $38.44. Micron shares closed Wednesday at $31.68.

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