The next successful wave of tech stocks is likely to include companies that are are poised to profit from the rise of smartphones and cloud computing, as well as artificial intelligence (AI) and greater connectivity, Barron's reports. Brad Slingerlend, manager of the $2.1 billion Janus Henderson Global Technology Fund (JNGTX), discussed his top picks in these areas. The fund had delivered a year-to-date total return of 34.6%, better than 80% of the funds in its category, as of the opening of trading this week, according to Morningstar Inc.

Future Tech Leaders

Among Slingerlend's favored companies are these ten: semiconductor makers Intel Corp. (INTC), Microchip Technology Inc. (MCHP), and Xilinx Inc. (XLNX); gaming companies Electronic Arts (EA), Activision Blizzard Inc. (ATVI), and Nexon Co. Ltd. (3659.Japan); Chinese online travel firm Ctrip.com International Ltd. (CTRP); cellphone tower operator American Tower Corp. (AMT); customer relationship management software provider Salesforce.com Inc. (CRM); and Chinese social networking, payments, and online entertainment provider Tencent Holdings Ltd. (0700.HK).

Apple's Lost Luster

Apple Inc. (AAPL), is among the Janus Henderson Global Technology Fund's ten largest holdings, but also is its biggest underweight position, Barron's notes. "We've seen virtually no innovation out of the company," Slingerlend told Barron's. He said that its product lineup has been largely unchanged for five or six years, and that it is falling behind in cloud services and media. While he thinks that the iPhone 8 will do well, he also opined that "the value of the iPhone operating system as a lock-in for the consumer is eroding, albeit at a slow pace."

Chipmakers

The outlook is different for the likes of Intel, which is supplying the microprocessors powering artificial intelligence applications, or AI, on the cloud computing network run by Microsoft Corp. (MSFT). Slingerlend finds Intel's position in AI to be underrated by the market. He likes Microchip Technology for its small, specialized, low-power chips that are useful in a variety of new applications. He cites Xilinx as a maker of programmable microprocessors that are well-adapted for use in AI applications.

In the bigger picture, he believes that the market is underestimating semiconductor manufacturers, despite strong stock performance during the past two years. He observes that the industry is on the upswing after years of decline, and that recent merger activity has made it less cyclical, given that fewer companies now are fighting for business. Meanwhile, the rapid growth of cloud computing, AI, and the Internet of Things (the interconnection of so-called smart devices) are all driving an explosion in demand for chips.

Video Game Stocks

Gaming stocks comprise 10% of the fund's portfolio, and it has big overweight positions in Electronic Arts, Activision Blizzard, and Nexon. Slingerlend sees these companies riding a new wave among consumers, paying subscription fees to download games online, rather than buying it in stores. He also expects e-sports, or competitive video gaming (including professional gaming), to be a big trend during the next decade. (For more, see also: Investors May Love the Fast Action in Video Games.)

Innovators

Janus Henderson is seeing "impressive innovation come out of China," Slingerlend tells Barron's, and he cites Ctrip.com and Tencent Holdings in this vein. The final two companies are well-positioned to ride technological waves led by others. American Tower operates many cellphone towers both in the U.S. and abroad, and the pending introduction of more advanced 5G mobile networks, as described by the MIT Technology Review, is expected to give the company an additional boost. Meanwhile, the rapid expansion of cloud computing is stimulating sales of enterprise software such as that offered by Salesforce.com. 

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