Recently, the semiconductor industry celebrated the 40th anniversary of Moore's Law -- named after Intel (NASDAQ:INTC) co-founder Gordon Moore, who predicted back in 1965 that the number of transistors packed onto a chip would double roughly every two years.

Perhaps it was only fitting, then, that the Santa Clara-based company should have had such a good week two weeks ago.

Intel posted a 25% increase in quarterly profits, a figure far outpacing its rivals -- including Advanced Micro Devices (NYSE:AMD), IBM (NYSE:IBM), Sun Microsystems (NASDAQ:SUNW), and Infineon (NYSE:IFX).

Intel also introduced its first WiMax communications chip (a development that should speed the spread of high-speed Internet access) and also unveiled its new dual-core technology a few days ahead of AMD.

Just last year, the future wasn't looking so bright for Intel. AMD's chips were outperforming Intel's on several fronts, and the company was forced to cancel a couple of high-profile projects. More bleak, from a long-term perspective, were reports that Intel researchers were predicting that Moore's Law would reach its limits in about a decade.

What a difference a year makes.

The first rays of hope appeared this past November when Intel executives released the company's road map to the future and announced that quantum dots, nanowires, and nanotube-based technologies were going to help the company extend Moore's Law.

This rather technical announcement was made more real last month when outgoing CEO Craig Barrett (who will be replaced by Paul Otellini but remain as chairman) was quoted as saying Intel could now see a path down to the 5-nanometer range.

In practical terms, this means that Intel is fairly confident Moore's Law won't hit its mid-life crisis until around its 55th anniversary -- or 2020.

To push this bold agenda forward, Intel is investing a significant portion of its nearly $5 billion research and development budget into nanotechnology. Furthermore, Intel Capital, the company's investment arm, as well as many of the company's internal efforts to partner with promising technology-related companies, have also focused on establishing relationships with nanotechnology start-ups as a way of helping it maintain its competitive edge.

In March, company officials -- in partnership with Great Britain-based Qinetiq -- announced the development of a "quantum well" transistor made out of a material called indium antimonide.

Investors needn't concern themselves with the material per se; what is important is that the atomic features of the material provide a three-fold improvement in transistor performance, without consuming any additional power.

It is just one example of the type of new nano-material Intel officials are confident that will be found to help it continue to meet Moore's Law.

Nanotechnology is also likely to play a crucial role in helping Intel deal with the critical problem of heat. As more and more transistors are packed onto chips, the circuits are running hotter and hotter. This problem is one of the reasons why the industry has moved to dual-core processors.

It is also why Intel Capital has invested in a promising nanotech start-up called NanoCoolers. The Austin-based company claims its technology can replace heat pipes with a technology that has no moving parts and is up to four times better at dissipating heat.

Intel is also working with another Texas-based nanotech start-up, Zyvex, to investigate how carbon nanotubes might be dispersed into polymers to act as a more efficient thermal interface.

Such advances are very helpful, but they will only get the company so far. This is why Intel is also working with Nanosys -- a leader in the development of nanowire technology. Intel officials are hopeful that such nanowires can be integrated into existing high-volume manufacturing processes and then laid over existing chip designs to produce hybrid chips that will extend Moore's Law a few more additional generations.

Beyond this, Intel has been very quiet about its involvement with quantum dot technology and carbon nanotubes. Its competitors, IBM and Infineon, have both been much more public about their work in the latter field, but as Paolo Gargina, a technical fellow at the company, said recently, "If we want to be in business by 2020, we have to start now." My instincts tell me that Intel has started to aggressively pursue a variety of options in this exciting field.

All of this work is coupled with the work the company is doing with companies like Crossbow Technology in the area of "sensor network" deployment and E Ink in the field of "electronic ink" displays, as well as its forays into the life sciences -- particularly with regard to chips that can be used for molecular diagnostics and disease detection. It all begins to paint a very compelling vision of Intel's future.

In fact, it is easy to see how Intel's future lineup of nanoscale products won't simply be limited to the inside of computers, PDAs, and mobile phones. It will enable sensors to be embedded in the environment around us, and quite possibly inside us, as nanowire computer chips are integrated directly into medical devices. These chips can sense and communicate the presence of individual proteins and molecules to signal disease.

And when all of these technologies are linked with its WiMax technology, or its next-generation successor, it is not a stretch to imagine that the company's current "Intel Inside" marketing strategy might be replaced with "Intel Around Us," to emphasize how all of its products and technologies help consumers connect to -- and harness the promise of -- a persuasive computing environment.

The Motley Fool Rule Breakers team is on the lookout for promising investment ideas in the exciting field of nanotechnology. Interested? Take a free, no-obligation trial today.

Fool contributor Jack Uldrich has been thinking small since grade school. He is the author of The Next Big Thing is Really Small: How Nanotechnology Will Change the Future of Your Business. He owns shares of Intel. The Motley Fool is investors writing for investors.