PALO ALTO, Calif. (CNN/Money) -
When the 80s cover band I heard in San Francisco this weekend played Prince's pop-music classic, "1999," I had two thoughts.
First, I couldn't believe how many years had passed since I saw the real Prince perform the song (Eighteen, but who's counting?). Second, I shook my head at how much time had gone by simply since 1999 itself.
And yet, here we are, after a three-year market drought, the bursting of several bubbles, numerous terrorism and health scares, and a war. And waddya know, tech stocks are partying again like it's you-know-what-year.
Amazon (AMZN: Research, Estimates), Yahoo! (YHOO: Research, Estimates), and eBay (EBAY: Research, Estimates) all hit 52-week highs last week and gave up relatively little in Monday's sell-off.
A bevy of semiconductor companies have doubled off their October lows. (Examples: Broadcom (BRCM: Research, Estimates), Marvell (MRVL: Research, Estimates), and PMC-Sierra (PMCS: Research, Estimates), which has tripled.)
And a little known Silicon Valley company like Avanex (AVNX: Research, Estimates) buys up the dregs of the fiber-optic equipment business of Alcatel and Corning and its stock nearly triples in a day.
What's going on here? Are we witnessing a rejuvenation of unbridled enthusiasm and optimism for tech stocks?
As I opined on last weekend's "Wall $treet Week with Fortune," appearances can be deceiving. What looks like an athlete in fighting trim is actually a man who'd been left for dead in a dark corner who has gotten up and is walking around again.
Avanex rolling up the fiber-optics field suggests not so much a bright future for fiber optics as any future for fiber optics, which might legitimately have been in doubt six months ago.
| Recently by Adam Lashinsky
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Listen to the comments in recent weeks of merely guarded optimism from the likes of Intel, IBM and Cisco and you know that hyper-growth isn't just around the corner.
Having said that, there's every reason to believe that growth is again in the picture. Witness the enthusiasm at tech buyout firm Silver Lake Partners, which I profile in the current issue of Fortune. Silver Lake believes tech is alive again.
But note the firm's sober approach. It's buying into leading companies that have fallen on hard times for one reason or another, like WorldCom and Flextronics. It is not speculating on go-go e-commerce companies whose valuations are as silly today as they were four years ago.
And perhaps there's the lesson for individual investors.
Should you invest in technology stocks again? Of course. In fact, if you favor index funds, you're already heavily invested. According to Standard & Poor's, the 83 information technology companies in the S&P 500 index comprise about 16 percent of the index's $8.7 trillion in market value.
Considering that technology comprises about 10 percent of the country's gross domestic product, the S&P 500 arguably is overweighted in technology. That seems appropriate given the opportunities for growth.
Have you loaded up on tech stocks and taken advantage of the surge? Congratulations. Are you going let the total become a huge percentage of your (depleted) life savings again, the way you did after 1999? If so, you have a very good idea of how that song will end.
Adam Lashinsky is a senior writer for Fortune magazine. Send e-mail to Adam at lashinskysbottomline@yahoo.com.
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