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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’s (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.

(Also Read: How to Invest in the "Internet of Things")

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.

1.       Microchip Technology (MCHP - Free Report)

Microchip 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. Right now, Microchip is a Zacks Rank #2 (Buy), and our current consensus estimates are calling for EPS growth of 31% and revenue growth of 11% this quarter. The company will now look to continue the momentum it has maintained with its 9.7% earnings beat in the most recent quarter, which included record sales figures. Shares of MCHP are already up over 25% this year, and the stock could climb higher with even more positive results.

 

2.       Cypress Semiconductor (CY - Free Report)

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 #2 (Buy), which pairs well with its “B” grade for Growth and “A” grade for Momentum in our Style Scores system. This is another stock that is up nearly 25% year-to-date, although a recent dip could allow investors a fresh opportunity to buy at a slight discount.

 

3.       Texas Instruments (TXN - Free Report)

Although you might recognize the brand because of its calculators, Texas Instruments is actually one of the leading suppliers of advanced semiconductors in the world. The company’s IoT profile falls under its Embedded Processors division, which includes the Connectivity, Microcontrollers, and Processors categories. In its most recent earnings report, Texas Instruments saw growth of 15% in its Embedded Processors segment, and that’s not to mention that it once again surpassed our consensus estimates for earnings and revenue. Texas Instruments is currently a Zacks Rank #2 (Buy).

 

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!

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

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