tech stocks best-positioned for Internet of Things

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Apple, Google don’t make Goldman Sachs’s list of tech stocks best-positioned for Internet of Things

June 26, 2014, 2:48 PM ET

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DC, Ericsson, Goldman Sachs Global Investment Research

Goldman Sachs has a list of 17 companies best positioned to take advantage of the Internet of Things with some interesting names and a couple of notable omissions.

Goldman Sachs notes:

While the fixed Internet connected 1 billion users via PCs, and the mobile Internet connected 2 billion users via smartphones (on its way to 6 billion), the IoT is expected to connect 28 billion “things” to the Internet by 2020.

While Google Inc. GOOG 1.70% just wrapped up its annual developer conference in San Francisco, and buzz is building about Apple Inc.’s AAPL  larger iPhones in the media, neither of the tech giants showed up on Goldman Sachs’s short list.

Goldman Sachs doesn’t ignore Google and Apple. In fact, Goldman has a Buy rating on Apple and a Neutral rating on Google, and both companies are seen expanding into the market of more and more Internet-connected devices. But in the focus on communication technology and chip companies, they just didn’t get the “best positioned” designation. Then again, that could be an apples vs. oranges argument. Goldman Sachs said the note is the first in a series about the Internet of Things, so the techs giants could get more focus in future notes.

So, where does Goldman Sachs see two rallying points in the new IoT revolution? Two big growth areas will be communications technology (meaning Wi-Fi, expanded cellular service, and so-called “fog” computing) and hardware (sensors, connectivity devices, and microcontrollers).

In these areas, Goldman Sachs sees the following 17 communication technology/chipmaker stocks as “best positioned” to cash in on the coming revolution:

But before this revolution takes hold, Goldman Sachs acknowledges one of the biggest barriers to connecting all our devices together is the issue of security. Already, Google’s operating system for cars is drawing concern that car-hacking can replace car-jacking, and in the latest round of security flaws even PayPal has been shown to be vulnerable.