What is the ‘Internet of Things,’ really? In a nutshell, it’s just connected technology — and that means chipmakers who specialized in connected technology are poised to profit.

One of the strongest corners of the market this year has been the semiconductors industry. Throughout the chip-making market, companies have successfully adapted to the changing needs of the consumer, including an increased demand for small, high-powered chips that enable “Internet of Things” (IoT) devices.

For those that don’t know, the Internet of Things is the growing world of interconnected household and industrial devices. Everyday products and machines can now be embedded with sensor technology to process data or interact with other electronic devices.

For example, consumer-level IoT products include things like Amazon.com Inc. (NASDAQ:AMZN) Echo “smart speaker,” wearable motion and activity tracking products, and advanced in-car technology. On the commercial side of the IoT market, industrial manufacturers have begun implementing sensors into machines to track performance and efficiency.

As demand for the microchips that power these IoT devices continues to grow, semiconductor manufacturers with a focus on IoT products will continue to benefit. With that said, we’ve found three already-strong stocks that are looking to benefit even more from further IoT growth.

Marvell Technology (NASDAQ:MRVL)

Marvell Technology is a leading designer, developer and supplier of mixed-signal and digital signal processing integrated circuits. The company’s “EZ-Connect” platform is used by a variety of global customers in the home automation, wearables, automotive, and industrial industries. After Marvell surpassed the Zacks Consensus Estimate by 25% in its most recent quarter, estimate revisions began pouring in for the company’s current-quarter and full-year earnings. The current Zacks Consensus Estimate for Marvell’s full-year earnings calls for EPS growth of more than 118%. This has helped the stock gain a Zacks Rank #1 (Strong Buy).

Microchip Technology (NASDAQ:MCHP)

Microchp Technology is a manufacturer of microcontroller, memory, and analog chips. The company is a leader in several IoT-related fields, including automotive and wireless connectivity. This is another Zacks Rank #1 (Strong Buy) stock, and our current consensus estimates are calling for EPS growth of 26% and revenue growth of 12% this fiscal year. Shares are up over 30% year-to-date, but this stock could break even higher given the right catalyst, and it might have just that. Indeed, last month, the company upped its sales and EPS guidance for 1Q18, sending shares higher.

Cypress Semiconductor (NASDAQ:CY)

Cypress Semiconductor is a leading provider of high-performance digital and mixed-signal integrated circuits. Just last year, the company shelled out $550 million to acquire Broadcom’s Wireless Internet of Things business and now its “WICED” Platform is one of the largest IoT portfolios in the industry. Cypress is currently a Zacks Rank #1 (Strong Buy), which pairs very well with its “A” grades for Growth and Momentum in our Style Scores system.

Bottom Line

The Internet of Things is one of the most exciting emerging tech markets in the world. Home automation products are fun. In-car technology is cool.

And while these specific products are interesting, the real moneymakers in these situations are the companies that are building the tech that powers these products. The Internet of Things needs semiconductors to function, and as the IoT grows, so too will semiconductor companies.

The best way for investors to cash in on this growing trend is to identify semiconductor companies that are not only investing in the Internet of Things, but are also displaying solid fundamentals and impressive Zacks metrics.

Want more stock market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!

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