While the Trump rally has been incredible, much of the momentum has been a result of big moves by high-dollar stocks. Investors looking for solid growth ideas should consider the huge possibilities for technology infrastructure, due to the massive growth in cloud computing, storage and security. Combine that with the huge growth in Terabit Optical Networking, and you have the potential for some powerful gains next year from a group of stocks that are not expensive.

In a new and outstanding research report, Dr. Vijay Bhagavath and his team at Deutsche Bank make the case that new infrastructure themes are numerous and powerful, and they list four areas they see big growth potential in:

• Security is thematically transitioning from “boxes” to “software and cloud based.”
• Top corporates are building “hybrid clouds” with on/off ramps to public clouds.
• We are in “early days” of a multiyear optical build-out cycle.
• 5G wireless and Internet of Things (IoT) are a “mega theme.”

Deutsche Bank is very positive on eight companies that are prominent in the sector, and here we focus on four that appear to have the biggest upside potential.

Acacia Communications

This had a red-hot IPO and has backed up huge since a secondary offering last fall. It is the top Deutsche Bank small cap idea. Acacia Communications Inc. (NASDAQ: ACIA) is a leading supplier of high-speed coherent optical interconnect products to network equipment manufacturers, hyperscale cloud companies and service providers. The company’s foundation is in its Digital Signal Processing (DSP) and a unique approach with its silicon-based photonic integrated circuit (SiPhi PIC). The company primarily combines the DSP and PIC to create modules, which are integrated into optical/networking equipment to provide high-speed optical interconnect.

Top Wall Street analysts have increased estimates following Acacia’s positive preannouncements, and while some were underwhelmed by fourth-quarter guidance, the company is adding new customers and demand is strong, with little competition. In addition, analysts expect that Facebook will use Acacia’s AC400 transponder module, with 400G dual-channel coherent digital signal processing application specific integrated circuit.

Acacia continues to benefit from strong demand across Web 2.0 direct customers, Chinese original equipment manufacturers and metro 100G cycles. Acacia additionally is benefiting from strength in China broadband optical roll-outs. Deutsche Bank noted in its report:

Our Top Small Cap Idea levered to double-digit growth trends in 100G+ (scaling to a Terabit in FY18+).Optical rollouts at Hyperscale Clouds and Service Providers.Acacia is disrupting the Optical Component industry by leveraging CMOS photonics, DSPs, and hence Moore’s Law economics.

The Deutsche Bank price target is a gigantic $126. The Wall Street consensus target is $112.50, and shares closed yesterday at $67.44.

Akamai Technologies

This company posted outstanding third-quarter numbers, and Deutsche Bank sees growth reaccelerating. Akamai Technologies Inc. (NASDAQ: AKAM) provides cloud services for delivering, optimizing and securing content and business applications over the internet in the United States and internationally.

The company offers performance and security solutions designed to help websites and business applications operate while offering protection against security threats. It also provides media content delivery solutions that are designed to deliver movies, television shows, live events, games, social media, software downloads and other content on the internet in fixed-line and mobile networks; adaptive delivery solutions for streaming video content; and download delivery solution that offers accelerated distribution for large file downloads, including games, progressive media files, documents and other file-based content.

The company guided fourth-quarter numbers much better than expected, and the analysts noted that the focus on cloud security, which was 40% of the compounded annual growth rate, and enterprise security are potential growth drivers going forward.

The analysts noted in the report:

We note Akamai recently acquired Soha Systems (October 2016), a “Cloud Based” provider of secure access to Enterprise Applications (i.e. Cloud VPN , Application Delivery and Virtual Desktop as a Service, etc). The Soha deal adds incremental conviction to our view on Akamai “doubling down” on Cloud Security via organic and inorganic strategies, enhancing the longer-term enterprise value of the company through an architecturally sticky and mid double-digit growth Cloud Security business.

The Deutsche Bank price target is $75. The consensus price target is $66.89. Shares closed yesterday at $64.25.

Cisco

This is one of the top mega-cap technology stock picks on Wall Street. Cisco Systems Inc. (NASDAQ: CSCO) designs, manufactures and sells internet protocol (IP) based networking products and services related to the communications and information technology industry worldwide. It provides switching products, including fixed-configuration and modular switches, and storage products that provide connectivity to end users, workstations, IP phones, wireless access points and servers, as well as next-generation network routing products that interconnect public and private wireline and mobile networks for mobile, data, voice and video applications.

Cisco offers service provider video infrastructure, including set-top boxes, cable/telecommunications access products, and cable modems, as well as video software and solutions. In addition, it provides collaboration products comprising unified communications products, conferencing products, telepresence systems and enterprise mobile messaging products; data center products, such as blade, rack and modular servers, fabric interconnects, software and server access virtualization solutions; security products, including network and data center security, advanced threat protection, web and email security, access and policy, unified threat management, and advisory, integration, and managed services.

The Deutsche Bank report said:

We see the company likely to increase its share of Carrier and Cloud capex spending for 100G+ Metro and Datacenter Optical network rollouts, as we head into 2017. CSCO’s 100G+ Metro design win at Verizon is a case in point. Cisco has the broadest set of Industrial IT design wins for Internet of Things Scale Cloud Networking platforms. We see 5G and IOT as a multi-year theme for the company, involving a wide range of hardware, software and Cloud Services portfolios.

Cisco investors receive a 3.45% dividend. The $37 Deutsche Bank price target compares with the consensus target of $33.11. The shares closed yesterday at $30.17.

Corning

This was a huge player in the fiber build-outs in the 1990s and may be ready to ramp back up for new deployments. Corning Inc. (NYSE: GLW) is one of the world’s leading innovators in materials science. For more than 160 years, Corning has applied its unparalleled expertise in specialty glass, ceramics and optical physics.

Its products enable diverse industries such as consumer electronics, telecommunications, transportation and life sciences. They include damage-resistant cover glass for smartphones and tablets; precision glass for advanced displays; optical fiber, wireless technologies and connectivity solutions for high-speed communications networks; trusted products that accelerate drug discovery and manufacturing; and emissions-control products for cars, trucks and off-road vehicles.

Deutsche Bank sees the company being highly leveraged to large spending growth that it expects to see in data center optical connectivity. The firm also ranked Corning as its top pick in the space going into third-quarter earnings, which beat estimates. A post-earnings report said:

We were clearly wrong in our bullish view on Hyperscale Clouds as a “near-term” growth driver for GLW’s Optical business. Fiber to the Home is clearly the primary near-term driver. Optical missed consensus, due to order timing issues (we believe) versus share loss.

The team sees the company as a winner in not only the new 5G wireless, but also in strong Internet of Things applications. They see both areas as infrastructure opportunities for the company given, what they say is the robust demand for IoT connectivity and 5G infrastructure builds. The analysts also note Cloud demand as a new growth driver for optical connectivity.

Corning investors receive a 2.22% dividend. Deutsche Bank has a $26 price target, and the consensus target is $23.28. Shares closed Monday at $24.32, so the Deutsche Bank target may be lifted at some point.

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In the report, Deutsche Bank also cited Arista Networks Inc (NYSE: ANET), Ciena Inc. (NYSE: CIEN), Commscope Holding Co. Inc. (NASDAQ: COMM) and Keysight Technologies Inc. (NYSE: KEYS) as the other top companies for the networking infrastructure themes.

All these stocks are solid recommendations for portfolios with a higher risk tolerance. While earnings should be solid, if they do hit a quarterly bump in the road, they could get hit pretty hard.

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