The Top Unsung Tech-Stock Leaders

So by the end of 2008, Intel will operate six fabs in all, four of which will operate on the advanced 45-nanometer process. Analysts expect this to slash production costs by a fifth, pushing gross margins much higher to nearly 60%, up from the current 52%.

With this expanded, low-cost production base, Intel will be able to competitively cater to users in developing nations, which already make up 40% of annual sales. In fast-growing nations such as Brazil and Russia, there are only about 10 computers per 100 members of the population, according to a United Nations study, compared with 76 per 100 Americans.

More reasons for optimism? Well, credible rumors are making the rounds that Intel's next-generation chip set, called Penryn, might be introduced in computer servers as soon as October -- two months ahead of schedule. That would put it in place to beat Advanced Micro's new server product, Barcelona.

For these reasons, I believe Intel's recent performance in the market is only a taste of what is to come. Right now, the stock is trading at 18 times my 2008 estimate of $1.40, which is at the bottom of its historic range. If the market gives the stock a more typical 25 times multiple and if investors come to believe that earnings estimate is achievable, you'll see shares at $35 to $38 by the end of 2008, which would be up to 50% higher from here. OK, now I'll say it: It's time to get Intel inside your portfolio.

Profit in Gadgets

If you want to consider a smaller chipmaker instead, take a look at Zoran(ZRAN Quote), which trades for $20 and sports a $1 billion market cap. It is probably the strongest up-and-comer, as it sells "systems on a chip" products into some of the fastest-growing segments of technology, including digital television, digital still cameras, high-end camera-phones and the new generation of high-definition DVD players.