As cloud data centers evolve and expand at a breathtaking speed, the technology to account for the huge amounts of data and its retrieval and disbursement is changing rapidly. It is very possible that rapid proliferation of data-hungry mobile devices is stressing data center processing, bandwidth and storage capabilities, forcing a structural change in data center architecture toward lower cost and more homogeneous building blocks.

In a new research report, the chip analysts at Jefferies point out that they expect an acceleration in cloud data center transformation to software-defined networking (SDN) to drive an industry shift from proprietary solutions to lower-cost standards-based solutions that deliver tangible benefits to consumers through higher efficiencies of network processing, connectivity and storage.

The Jefferies report points to seven top chips stocks expected to benefit the most from this transformation.

ARM Holdings PLC (NASDAQ: ARMH) designs the semiconductor intellectual property and enabling technology at the heart of the world’s advanced digital products. Its energy-efficient and scalable processors deliver the intelligence that is transforming society, from smartphones and wearable devices to enterprise infrastructure and servers, to embedded technology in automotive, industrial applications and the Internet of Things. The investors are paid a small 0.6% dividend. Jefferies has a $55 dollar adjusted price target. The Thomson/First Call price target for the stock is $52.85. Shares closed Thursday at $50.55.

Cavium Inc. (NASDAQ: CAVM) has done poorly over the past six months as the market focuses on its large amount of business with Cisco Systems. Cisco accounted for almost 20% of Cavium’s revenue in the recently reported fourth quarter. Cisco is going through some difficult times, which seems to be overshadowing Cavium’s solid growth. The company has made good progress in an effort to capture as much of this market as possible. Its new 28-nanometer products are finding traction in enterprise, data center and service provider segments. The Jefferies price target is raised to $51, and the consensus target is $40.56. Cavium close Thursday at $44.48.

Finisar Corp. (NASDAQ: FNSR) was recently upgraded, and the analyst was very bullish on the stock. Jefferies analyst James Kisner recently raised his rating on the shares to Buy from Hold, and raised his price target to $30 from $24, after conversations with “industry contacts” suggested to him very strong demand trends in data center optics and a good backdrop for Telecom optical spend in 2014. The consensus price target is $29.34. Finisar closed Thursday at $23.90.

Inphi Corp. (NYSE: IPHI) is upgraded from Hold to Buy at Jefferies. The Jefferies team sees a compelling case for upgrading from 10G to 100G interconnects, and Inphi should dominate as the only company with a full silicon solution for 100G. Inphi provides high-speed analog and mixed signal semiconductor solutions for the communications, data center and computing markets worldwide. The Jefferies price target is boosted from $14 to $17. The stock closed Thursday at $15.17.

Intel Corp. (NASDAQ: INTC) stands to be a large winner in the huge cloud data center growth. Last September, Intel and Corning announced that they had successfully transmitted 100G of data with the Intel Silicon Photonics module and Corning’s MXC connect and ClearCurve fiber. Contacts from Intel and Corning indicated that this demonstration was performed essentially under perfect conditions and that given the inherent variability of the manufacturing process, 300m is the reach that they believe can be achieved reliably in production. Intel pays shareholders a very solid 3.6% dividend. The Jefferies price target is $32, and the consensus figure is at $25.20. Intel closed Thursday at $24.63.

Micron Technology Inc. (NASDAQ: MU) is a global leader in advanced semiconductor systems. Micron’s broad portfolio of high-performance memory technologies — including DRAM, NAND and NOR flash — is the basis for solid state drives, modules, multichip packages and other system solutions. The company’s memory chip solutions enable the world’s most innovative computing, consumer, enterprise storage, networking, mobile, embedded and automotive applications. The Jefferies price target for the stock, which soared last year, is $30. The consensus target is lower at $27.69. Micron closed Thursday at $24.77.

SanDisk Corp. (NASDAQ: SNDK) is another top stock that is Buy-rated at Jefferies with an increased price target. SanDisk’s quality, state-of-the-art solutions are at the heart of many of the world’s largest data centers, and they are embedded in advanced smartphones, tablets and PCs. Investors are paid a 1.2% dividend. The Jefferies price target is $90, and the consensus figure is at $79.59. The stock closed Thursday at $75.45.

The Jefferies analysts believe that the shift to SDN will increase the return on investment while reducing frictions to deployment of data center infrastructure. This is critical as the demands for data storage, video and audio streaming and a host of other services we now take for granted are exploding. SDN will offer the ability to quickly update or change cloud data center capabilities through programmable modules. This is a huge step forward in terms of providing quickly what customers need and want.

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