Dear Money Morning Reader,

PCs are making a big comeback in the States.

Most of the country's businesses are still struggling to make headway on the sales growth front. But America's personal computer manufacturers look like they're about to hit the jackpot.

What's more, several of the country's technology companies are in the same boat. And better yet for investors, unlike much of the rest of the US stock market, there's still good value to be found in the tech sector. Here's how to make money from it...

Life is looking good for tech stocks right now

David Rosenberg at Gluskin Sheff isn't known for pulling his punches. "The [American] recovery is far more fragile than the majority of economic commentary would lead you to believe", he says. "The market is operating 'on fumes' right now, and is seriously overbought, overextended and overpriced".

Couldn't agree more. We were talking on the same lines last week (Why this could be the top for US stocks). But although he's very jittery about the overall share price level on Wall Street, Rosenberg isn't bearish about every part of America's stock market. He has the tech sector down "as one of the best in the US from a valuation standpoint".

In other words, shares in the sector look relatively cheap at the moment. That's always a good sign. Even when the market overall isn't moving in your favour, you've always got a good chance of eventually making money by buying stocks when they're available at good value prices.

Even better, unlike much of the rest of the US economy, life is now clearly looking up for the tech sector.

Why the tech sector is booming

For example, there's a quantum shift underway in the telecoms industry. After a 160% jump in data traffic in 2009, "US wireless networks are now too congested to handle even simple voice traffic, let alone any fancy applications that require loads of bandwidth", says Daren Fonda in SmartMoney magazine.

So the telecoms companies who own these networks will have to spend vast amounts of cash on new kit to update them. Otherwise the services they've spent so many years developing won't work.

"Despite the sluggish economy, companies are planning to spend more than $126bn in information technology and wireless infrastructure upgrades this year", says Fonda. That's up 10% on 2009.

And mobile video is growing so fast that it's expected to account for two thirds of wireless data traffic by 2014. So billions more bucks will have to be spent on extra equipment over the next several years, says industry consultant Infonetics Research.

Meanwhile, against all the odds, prospects for computer makers are picking up too. "The personal computer was beginning to look like yesteryear's gizmo, a technology relic overshadowed by smart phones, e-readers and, lately, Apple's iPad", says Ashlee Vance in the New York Times. "But the old beige box has proved remarkably resilient and relevant".

Much of this is due to the introduction of netbooks. These are cheaper and smaller laptops which have effectively created a whole new category of computer. They helped the PC industry shrug off last year's recession and to ring up a surprising 5% rise in worldwide sales in 2009.

Firms that haven't previously been in the PC building business, such as Google and Nokia, have joined the party. Google is developing an operating system to compete with Microsoft Windows, while Nokia now sells a laptop.

But there's another important factor at play here. Many big companies haven't bought new terminals for at least four years. In computer terms, that's almost a lifetime. So many firms have now started upgrading their machines.

This year, global sales have been growing like gangbusters. PC shipments around the planet climbed by a huge 27.4% in 2010's first quarter compared with the year before.

That was far better than expected, says Gartner Technology Business Research. And the rest of 2010 looks set fair. Wall Street analysts are now pencilling in a 25% rise for the year as a whole.

So how do you cash in on this spending boom?

Intel still looks cheap

Clearly, lots of new computers will mean that many more chips will be needed. Which is where the world's largest chipmaker Intel (Nasdaq: INTC) comes in. To prepare for what it reckoned would be much tougher times ahead, the company has become leaner and meaner in recent years. It has cut its workforce by 15% since 2006. Capital expenditure as a percentage of revenue has been chopped by fully 60% since 2001.

But now, sales are soaring again. Last week's 2010 first-quarter figures were stunning. In its "best first quarter ever", Intel said that net income for the period rocketed by 288% on revenues up 44%.

We tipped Intel a couple of months ago as a "much under-loved value stock that could offer upside of 25% or more over the next few years".

Since then the shares have risen around 18%. But the good news, if you haven't bought in yet, is that Intel still looks very cheap compared with its history. The stock has been hugely de-rated over time. It was once on a multiple of 67, but is now on a forecast 2010 p/e of just 13, dropping to just 12 in 2011. Against that, the industry-wide average multiple is now above 15.

And the prospective yield, at 2.6%, is around 30% higher than the overall market average.

But Intel is by no means the only tech stock to offer good value. I'll be looking in more detail at other ways to make money from the new US tech boom in the next issue of MoneyWeek magazine, out on Friday (if you aren't a subscriber already, claim your first three issues free here). Look out for it.

Until next time,

David Stevenson

Associate editor, MoneyWeek UK