I have made no secret of my admiration for IBM (NYSE: IBM ) . Big Blue was my selection as the best blue chip for 2007, as well as the best tech stock of the year. And although I didn't profess my love for the company on Valentine's Day as my colleague Tim Beyers did, I easily could have.
One of the reasons I remain so bullish on IBM is because of its unique ability to use the tools it creates to make new and improved tools. In more technical circles this is known as an auto-catalytic process, but to better demonstrate the concept, let me give you a concrete example.
Last month, both IBM and Intel (Nasdaq: INTC ) separately announced that they had developed a new material, based on the element hafnium, to use in a component of the computer chips called the gate dielectric -- which helps control the flow of electrons on a transistor.
The two companies also indicated they had created a new material for the gate itself (the component responsible for switching transistors on and off), but neither was willing to disclose anything about how the material was created. Instead, they likened it to a "secret sauce."
At the time, I said that IBM -- which is also working with Advanced Micro Devices (NYSE: AMD ) and Sony (NYSE: SNE ) on these chips -- had the long-term advantage because it indicated that its "secret" material allowed the gate to be embedded directly into silicon. This is significant because it will free up additional space to pack more transistors on the next-generation chip or, alternatively, reduce power consumption.
After reading in a technical journal about how the gate dielectric material was aided greatly by computer-based simulations run on IBM's own Blue Gene/L supercomputer, however, I am even more convinced that IBM and AMD have the upper hand on Intel.
According to PhysOrg.com, over the course of five months, IBM's supercomputer simulated more than 50 different models of hafnium silicates and performed an astonishing 200 billion billion operations to find the ideal gate dielectric.
And while the article doesn't mention that the same process was also used to find the "secret sauce" for the gate material, I have to believe it was.
All of this is important because in addition to producing computer chips that are twice as fast as existing chips, IBM will also be able to use these chips to create even more powerful supercomputers. And these supercomputers, of course, will be able to simulate the creation of even better new materials in the future.
Essentially, IBM has created a "virtuous cycle" whereby every advance in new materials leads to more powerful chips; and the new chips, in turn, can be used to build more powerful supercomputers.
Any way you slice it, IBM has a good thing going with this "new materials/improved computer chip/more powerful supercomputer" loop, and it is just another reason I think Big Blue computes as a solid investment.
Interested in reading more about IBM? Check out these articles:
Intel is an Inside Value recommendation. Looking for undervalued top-shelf stocks? Finding and recommending them is Inside Value's specialty. Try it out free for 30 days.
Fool contributor Jack Uldrich owns stock in both Intel and IBM. The Fool has a strict disclosure policy.