Why tech is not a bubble. Seriously.

By Paul R. La Monica, assistant managing editor

NEW YORK (CNNMoney) -- With tech stocks of yesteryear surging so far in 2011, it's reasonable to wonder -- and perhaps worry -- about whether a new bubble is forming again before our very eyes.

The Nasdaq is currently hovering at about 2,830. That's the highest it's been since November 2007. The tech-heavy index is now just 6% below the key psychological milestone of 3,000. The Nasdaq hasn't traded above that level since December 2000.

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But it's important to remember that even though companies like JDS Uniphase (JDSU), Priceline (PCLN), Amazon.com (AMZN, Fortune 500) and Apple (AAPL, Fortune 500) are all soaring, techs still have a long way to go before they get back to their super-frothy peaks of 2000. And they may never get there.

That's a good thing.

Say what you want about how insane it is for techs to be up as much as they are in a short period of time -- the Nasdaq is up almost 7% this year already, and more than 31% in the past six months. But you can't talk about tech being a bubble without taking a close look at how stupid things were at this time 11 years ago.

The Nasdaq hit an intraday peak of more than 5,132 in March 2000. It fell to a low of 1,108 by October 2002. So even though the Nasdaq is up over 150% from its nadir, it is still 45% below its summit.

"'Never' is a long time. Eventually, the Nasdaq will probably get back there, but I don't see that in the near future," said Brad Sorensen, director of market and sector research with the Schwab Center for Financial Research in Denver.

Cisco, which many thought would become the first company to hit $1 trillion in market value, traded at about $68 a share in March 2000. Shares are now at $19. Of course, Cisco (CSCO, Fortune 500) is no longer as viewed as a hot growth stock anymore after a series of disappointing quarterly outlooks.

But some other resurgent techs are also trading at mere fractions of where they were before the bubble burst.

JDS Uniphase shares, which trade at $25.50 now, were at a split-adjusted $1,100 in March 2000. Chip company Broadcom (BRCM, Fortune 500) was a $160 stock 11 years ago. It trades at $42 now. And Alcatel-Lucent (ALU) -- back when it was just Alcatel, before it and Lucent merged in 2006 -- now trades at $5. It used to trade at $45.

"There really are no comparisons now to the tech bubble of 2000. Valuations are more in line with reality," said John Norris, managing director of wealth management with Oakworth Capital Bank in Birmingham, Ala.

Norris said the big difference now is that much of the promise and hype about tech from 2000 has finally translated into real profits, sensible business models and strong balance sheets for the tech giants. Norris owns Apple, Oracle (ORCL, Fortune 500) and Broadcom, for example.

Some high-profile techs are even worth more now than they were in March 2000. Apple, Amazon and eBay (EBAY, Fortune 500) come to mind.

But note the trend there. These companies are all market leaders. The days of also-rans getting bid up to insane heights are hopefully gone for good.

"That was a bubble that we don't want to get back to," Sorensen said. "A lot of the more speculative companies from back then are no longer even around."

Simply put, the big tech companies probably can continue to benefit from explosive growth because tech is so much more ubiquitous in our daily lives than it was even a decade ago.

The Internet in 2000 was still sort of a digital Wild West. Many wondered if people really would feel secure enough to put their credit card information online to purchase things.

Now, people don't blink about blabbing their innermost thoughts to hundreds of friends or followers on Facebook and Twitter. We're nearing a point where using your phone to pay for a Frappucino may become common. Science fiction movies aside, we seem to trust and embrace tech more than we fear it.

"Look at Watson playing Jeopardy!," said Keith Springer, president of Springer Financial Advisors in Sacramento, Calif. "People thought that would have been end of days just a few years ago. Now people were upset when he got a question wrong."

Springer said the tech stock boom makes sense, but he conceded that there's some reason to be nervous about the sector. Private companies are raising what seem to be ungodly sums of money.

It's easier to make the case that Apple should be worth $300 billion than it is to say that Farmvillle creator Zynga is worth $10 billion.

"It definitely seems like an overheated bit of zealousness with some private tech companies. That's a lot like the late 1990s," Springer said.

Sorensen agreed. A new wave of dot-com initial public offerings is in the cards and that could create more bubble comparisons. LinkedIn is barely profitable and Pandora is losing money. Both just filed to go public.

There's a lot of chatter about whether Groupon, which reportedly turned down a $6 billion buyout offer from Google only to then go out and raise, like, $1 billion from private investors, may soon follow suit. And of course, everybody can't wait for Facebook and Twitter to go public.

"There is a disconnect between the valuations for some private and public tech companies. Some of the enthusiasm may be excessive," Sorensen said.

And that poses a potential problem down the road. After all, today's hot VC-backed firms may eventually be the cause of another Nasdaq bubble.

"Some private companies are being ridiculously priced. It does look like people are throwing good money after bad again," Norris said.

Reader comment of the week .. and see you on 2/28! Book stores, sadly are a dying breed. Borders finally couldn't prevent the inevitable and filed for bankruptcy this week. Like many businesses, a refusal to adapt to tech trends until it was too late helped do the company in.

Aksh Gupta, aka @theAkshEffect on Twitter, summed this up best: "4 yrs ago I searched for keyword 'digital' in Borders annual report,didnt find even one. Today Borders declared bankruptcy."

Anyway, The Buzz is taking advantage of the holiday-shortened week and going on staycation. Be back on Monday, Feb. 28.

-- The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, and Abbott Laboratories, La Monica does not own positions in any individual stocks.  To top of page

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Data as of 2:44pm ET


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