(FORTUNE Magazine) – Last year was the first time FORTUNE assembled its list of the 40 wealthiest Americans under the age of 40. The timing seemed oh-so-right. Everywhere you looked--especially if you looked in Silicon Valley--young people were getting very, very rich. And they weren't doing it the old-fashioned way. They didn't inherit large sums, earn fancy degrees, or toil away at big corporations. Instead, they found the Internet and they ran with it.

This year we've pulled together another list of the young and hyperrich. The broad outlines of the story haven't changed. Most of the money is new, earned by entrepreneurs now mainly in their 30s and overwhelmingly in the field of technology. Most of the 40 have stayed at work; indeed, most say they're still obsessed with their jobs.

And yet...everything's different.

More than half of the executives who made the list last year have dropped off, and their replacements come largely from different sectors of the high-tech economy. Nearly a third of last year's winners were bumped by the market's springtime hurricane, which ravaged the wealth of earnings-challenged, consumer-focused dot-coms. Thus, Scott Blum of Buy.com is gone, $1.2 billion poorer than last year. So is Jeff Arnold of WebMD, who is $181 million lighter, and Toby Lenk of eToys, who saw $234 million of his net worth vaporize. (For more on Lenk, see "The Last e-Store on the Block," in this issue.) In their place are the founders and CEOs of the current hot sectors of the tech market: Internet infrastructure and broadband. The newcomers include Monte Zweben, CEO of Blue Martini Software, which creates applications that help companies interact with customers online (No. 10 on our list, with $1.7 billion in assets); Rick Barry of fiber-optic networker Sycamore Networks (No. 18, with $710 million); and the first woman to qualify for the 40 Under 40, 39-year-old Weili Dai (tied for No. 21, with $648 million). Dai's company, Marvell Technology, makes semiconductors for broadband systems; it contributed three of this year's 40.

The other major change this year: But our list, perhaps the most exclusive grouping of Gen-X business people ever assembled, got even more exclusive. To make the list, you needed over $430 million--enough to stage both the Republican and Democratic national conventions for the next 16 years--compared with $243 million last year. The new hurdle was almost too high even for the renowned aerialist Michael Jordan to clear; he squeaked in as No. 40. Last year's 40th-ranked person, Gregory Reyes of Brocade Communications, more than tripled his worth, to over $1 billion--but that only bumped him up to No. 13. You get the picture. We are talking serious, unimaginable, unspendable wealth--and considerably more of it than last year.

What did these 40 do to accumulate that kind of money? Drive had something to do with it, and salesmanship. Deep engineering skills played a part for some members. But the attributes that figure in almost everyone's story are timing and foresight: Nothing in the history of American enterprise has paid off quite as well as being the first to perceive (and act on) trends in the whirlwind evolution of digital technology, especially the Internet.

As you'll see in the pages that follow, not all of the new wealthy are equally comfortable with their success. Some, like Raul Fernandez of Proxicom, absolutely relish the recognition and the power that comes with it. Others, like Vincent Smith of Quest Software, want very much for you to think they're still just regular guys. And others, like Michael Robertson of MP3.com, who have loved and lost their megawealth, have had to come to terms with once again being merely extremely wealthy. That might be a useful skill for all of this year's 40 to cultivate. For if there's any prediction you can make about the 40 Under 40, it's this: Next year, it will be different.

Vinny Smith is sitting at a table in his Spartan office. He's laughing kind of nervously as he flips through a printout of last year's 40 Under 40 list. "Oh, I love this guy's entry," he says, lifting a page and reading aloud. "'Role models: Julius and Augustus Caesar.'" Smith rolls his eyes and guffaws. He says he doesn't read a lot of newspapers and such, and he seems a little uneasy at being interviewed. Like a lot of young people who have made fortunes in the new economy, Vinny Smith doesn't want you to think of him as being different, or special, or rich--even though he has managed, through hard work and more than a little savvy financial maneuvering, to accrue $1.9 billion. No. 9 on FORTUNE's 40 Under 40 ranking is just a regular guy. Really.

You can see how he might just be able to believe this. Smith, 36, is CEO of Quest Software, which is quartered in non- descript offices in a high-rise in suburban Irvine, Calif.--an hour south of Los Angeles and a universe away from Silicon Valley and the hubbub that surrounds it. Few people know who Smith is; only slightly more have heard of his company. Smith's business partner, Quest President David Doyle, says that a lot of people confuse Quest with Qwest, the Denver-based telecommunications provider. "We keep getting frantic calls from people asking 'What about my phone service?'" he says. As you might expect, no one has heard of Doyle either. But at 39 and with $792 million of his own, he also makes FORTUNE's 40 Under 40 list, at No. 17.

Doyle was the one who founded Quest, along with a partner. Back then--it was 1985, and the Pasadena-born Doyle was just 25--the company mainly wrote applications for the HP 3000 minicomputer. Life was easy. "Hewlett-Packard would just come to us," recalls Doyle. "We were making good money, and that was nice." Indeed. Doyle had achieved one of his life's goals--to become a millionaire by age 30--and was content. He seldom thought about expanding.

Until Vinny Smith came into the picture, that is. Unlike Doyle, the Baltimore-bred Smith didn't spend his high school years programming. He played sports and invested a lot of time in goofing off. "I remember one time I got three F's and three A's on my report card," he says. "I only got into the University of Delaware because my uncle was a professor."

At Delaware, though, Smith discovered he really liked computer science and economics, and he settled down. After graduation he moved to Silicon Valley and took a sales job at Oracle, leaving after five years to co-found a software company, which sold two years later for $34 million. With his share of the money he tried being a ski bum, but gave up and co-founded a venture capital firm. That's what brought him to Quest.

By 1994, Doyle and his partner had decided to write software that worked with Oracle databases. An Oracle veteran, Smith grew more and more intrigued by the upside of Quest's business. Eventually, Smith bought out Doyle's partner for $35 million and convinced Doyle that the company ought to be big.

At this point, both businessmen had been millionaires for years. What catapulted them beyond mere wealth was that they then placed a daring bet on themselves. They took huge ownership positions in Quest (Smith increased his stake by buying shares from Doyle) and undertook an ambitious expansion of the company by acquiring other small software firms with an Oracle connection. Today Smith owns 42% of Quest's stock; Doyle, 16%. "We put everything on black," Smith says, "and spun the wheel."

Execution and luck delivered the jackpot. By focusing its resources on supporting Oracle databases, Quest latched on to a product that shot clear through the roof. "We lucked out, because Oracle ended up doing extremely well," Doyle says. In the first half of 1999, Quest took in revenues of $28.3 million (compared with $5 million for all of 1995), and the company grew to more than 400 employees. It was also profitable. Smith and Doyle decided to go public. The August 1999 IPO was a success, and the two partners saw their paper wealth soar to a peak of $3.4 billion for Smith and $1.4 billion for Doyle. Like most tech stocks, Quest has wobbled since then. But because Smith and Doyle own such huge stakes, they're still sitting very, very pretty.

It's a surreal set of circumstances, really--and Smith reacts by grasping at what's familiar and ordinary. In conversation, he ladles on self-deprecation: about his dismal grades in high school, his "barely" making the varsity wrestling team at Delaware, and so on. More than once during his interview with FORTUNE, he refers to himself as a "butthole." He also--repeatedly--describes his wife telling him, "You're a pain in my ass!"

True to form, the billionaire is tightlipped about his cash. He says that he always wanted to be rich, but mainly "to find out what it was like." Smith hasn't bought a new car since the IPO, and he won't fess up to any flashy new hobbies. He only admits to one big purchase--a ranch. "I don't want the massive change in lifestyle," he says. He, his wife, and his kids still live in the same home he bought when he first came to Irvine, although he admits, laughing, that that's a "touchy issue." Smith and his wife also own another house in Annapolis, Md. "You could afford to buy that one," he tells FORTUNE's reporter, who lives in a one-room apartment.

Smith still hangs out with his old college crowd; he has gone in with one of them on an investment in some Ground Round and Burger King franchises on the East Coast. On a lark, he and his wife recently worked a day flipping burgers. "My wife says the hardest thing she's ever done is working the drive-through line," he says. Lest he miss yet another chance to put himself down, he adds, "I made sure to stay back in the kitchen." Only toward the end of his interview does Smith give a clue about exactly why he's so uncomfortable with his new status: He might have had money before, but no one around him really understood how much. Now, as CEO of a public company, he must disclose his finances for all to see. "It isn't that we have more money," he says. "It's that now everyone knows about it."

David Doyle doesn't seem to mind who knows about his money. He will admit, without blinking, that he has always wanted to be rich. The IPO hasn't provoked any self-image issues for him; the main challenge he faces is simply getting used to the scale of it all. Ask Doyle about his fortune and he doesn't call himself a butthole. He gives you a winning grin. "I know," he says. "It's wild. I never planned to be a billionaire by 40, but..." His voice trails off and he shrugs, mischievously.

There's a kid-in-a-candy-store quality to the unmarried Doyle. He runs through a real estate wish list: He says he wants to buy a house on the harbor in Australia, on Sydney Harbor, and he's currently closing on a home with a view of Catalina Island (another "life goal"). He also wants a vineyard in the Napa Valley, as soon as the market there cools down. He's been collecting fine wines since his college days, and now has an astounding 11,000 bottles (only 7,000 of which fit in his home cellar). He says his all-time favorite wine is a burgundy but that he drinks mostly zinfandels. "You know, pizza and stuff," he explains.

Doyle, like Smith, still hangs out with friends he grew up with in Pasadena. But he also rubs elbows with a fancier set--his wine friends. While he says he's not really part of the superexclusive crowd, he's a regular at the chichi Napa Valley Wine Auction, which benefits charities near the vineyards. This year he bought 96 bottles of wine, complete with a movable feast at some Oakville, Calif., wineries, for $150,000. And he offered the second-highest bid on what ended up being the most expensive single lot sold at the event: ten bottles of Harlan cabernet that went for $700,000. "I don't know what I was thinking," he says. "I mean, I still have a sense of value. I often look at things and think, That's too much money!"

Doyle and Smith both say they'll keep on working at Quest. "It's still fun," says Doyle, who does admit that not knowing everyone's name at the company kind of freaks him out. But he's adjusting. "I think over the next couple of years things will change. We'll get more visible." Smith, who four years ago promised his wife they'd be in Irvine only a year, agrees: "I think we're creating an awesomely great company." Then he adds, without a hint of self-mockery, "I wish I could have bought more of Quest."

It's Aug. 2, and Raul Fernandez, 34, finds himself at the Republican National Convention in Philadelphia. He's scheduled to speak to the delegates that evening--during prime time to be exact, only about an hour before Dick Cheney will take the stage.

Fernandez is no stranger to politics--he grew up in suburban D.C. and spent four years working on Capitol Hill for Jack Kemp--but that has nothing to do with why he's here. You see, Fernandez has been asked to speak because he's CEO of a Reston, Va., Internet consulting company called Proxicom, which has made him worth $573 million, good enough to be No. 32 on FORTUNE's list. (He has also been asked, of course, because he's a Republican, and because his dad comes from Cuba and his mom from Ecuador). Fernandez has been worth hundreds of millions of dollars for about 18 months now, ever since Proxicom's IPO. He has had some time to get used to what it feels like to be rolling in dough. And he's figuring out that it feels pretty awesome all around.

One thing that's fun about it: A lot of people want to talk to him. George W. Bush's first stop in Philly? An event Fernandez co-sponsored on the steps of the Philadelphia Art Museum: "Bienvenidos a Philadelphia." ("It's where Rocky was filmed!" Fernandez, who likes to box, says excitedly.) Throughout the day, he hobnobs with the big boys: his old boss Jack Kemp (now a Proxicom board member); head Bush strategist Karl Rove; and Virginia Governor Jim Gilmore, who wants to do lunch. Fernandez also, somehow, finds time to give interviews to the Washington Times, The Industry Standard, and CNN.

And then there's the speech itself. Fernandez has spent the day surrounded by a group of friends from high school, who look after him--persuading him, for example, to nap before his speech. But as he heads into the convention green room, they leave him alone and head to a skybox to watch.

Almost exactly on schedule, Fernandez strides to the podium, pauses for a second, and begins. "The Internet gave me the opportunity to go from being the son of immigrant parents to being the CEO of a multibillion-dollar company!" he declaims. The crowd roars. Fernandez powers through the speech for his allotted three minutes and breaks into a relieved grin. The buddies turn to each other. "He did great!" one of them crows.

Fernandez walks offstage and finds his friends upstairs. "Did you hear them cheer when I talked about the company?" he asks his friends, excited. "It's something, isn't it?"

Yes, it is.

Raul Fernandez's rise to filthy-rich-guy status wasn't a result of ruthless cunning or a random stroke of luck. It was instead the sort of thing that can happen to a smart, articulate, infectiously enthusiastic entrepreneur in a free-enterprise system. In the Internet era, it just happens in a much, much bigger way.

Fernandez grew up middle class, edited his high school newspaper, and played a lot of soccer and tennis. He graduated from the University of Maryland in 1989 with an economics degree. Two years later he had his first seed money: a $40,000 cash hoard he managed to scrape together working on Kemp's staff and at a couple of defense contractors, in marketing and project management. He planned to buy a house.

Instead he spent the nest egg starting Proxicom, and his life changed forever. Fernandez didn't immediately hit on the right idea for the company. Initially he intended it to develop client-server applications. Most businesses at the time depended on this software, which typically ran on a central computer networked to smaller, client machines, such as PCs. (Fernandez had learned the technology at his previous jobs in defense.) Then, as the Internet was gathering steam, Proxicom landed a project with MCI and Mosaic--the precursor of Netscape--to work on one of the first secure e-commerce sites, Marketplace MCI.

Fernandez's big break came in 1994, and it didn't have much at all to do with his technology know-how; it had to do with his personality. By chance, Fernandez found himself on a flight with AOL muckamuck Ted Leonsis, who was talking with someone about the Internet. Fernandez overheard the conversation, and--in his most engaging way--handed Leonsis his card and told him about the MCI project.

Fernandez says he was surprised when an AOL VP called him up within two weeks to talk about building the AOL.com site. Proxicom got the job. It had found its niche, Internet consulting, several years before e-consulting caught on big. By the end of 1995, the company was pulling in revenues of $6.3 million. Proxicom went public in 1999 and climbed to a market cap of $3.2 billion.

Proxicom's stock performance--and Fernandez's wealth--has largely tracked the performance of all the companies in its sector. It's been, at times, a bumpy ride. During the Nasdaq burnoff in April, Proxicom stock fell 53% in a week--the same week Fernandez was attending his bachelor party in Cancun. As his friends tossed back margaritas down the hall, he was working the phones in his room, doing damage control.

Proxicom has grown its business by anticipating which Internet trends will attract blue-chip clients. They, after all, are the ones who "have money and have customers," as Fernandez puts it. (Most of Proxicom's customers today are big and established, like General Motors, General Electric, and PG&E; less than 2% of its contracts are with dot-coms.) Back in 1995, staying ahead of the trend meant shifting almost entirely to intranet and business-to-business projects at a time when e-tailing was all the rage. These days Fernandez wants to get into "multichannel initiatives." That basically means that he thinks the Next Big Thing is wireless applications, and he wants to be sure that they're a part of Proxicom's product mix.

It's a frenetic life. Fernandez often works seven days a week, and is scooting around in a limo or private jet as often as he is in the office. When he's not running Proxicom or chatting it up with analysts, he works out, helps his wife with the renovation of their new house in Bethesda, hangs out with other D.C.-area tech moguls (who are becoming a visible and powerful group in the region), or takes off to "wear flip-flops" at his condo on Fisher Island, near Miami.

Amid all this, Fernandez is also trying to launch a new business. He wants to turn the infrastructure he has built to manage his own money into a revenue-producing service. HighNets.com, as he calls it, will offer a variety of online financial services to the over-$20-million-net-worth crowd. (You know, tips on buying shares in a jet, planners to set up your charitable trust, information to help you pick which startups you'll personally fund, etc.) "Our tag line is 'wealth, giving, living,'" he tells FORTUNE.

So he's targeting the 40 Under 40 crowd?

He grins. "Exactly!"

Fernandez figures he knows what he's talking about. "I've already had a lot of the experiences you can have with money," he says. Indeed, he's given more than $6 million to charity. He's paid into one of those jet-sharing deals. He had Tony Bennett perform at his June 3 wedding. He's even started buying sports teams. Fernandez--along with Leonsis, roll-up artist Jon Ledecky, Dick Patrick, and Michael Jordan--is a partner in Lincoln Holdings, which owns the MCI Center, the Washington Capitals, and shares in the Washington Wizards and Mystics. (A Caps jersey now hangs on the wall of his Reston, Va., office.)

It's all gotten him a lot of attention, which Fernandez says can be good and bad. "Sometimes I feel like the latest attraction at the National Zoo," he sighs. "But it will quiet down."

That's hard to imagine. A couple of weeks after the Republican Convention, Fernandez is zooming toward his office in a chauffeured car, talking about the experience. "You know, it was more fun than I thought it would be," he says. "Those were three of my 15 minutes of fame well spent." He asks me whether I saw a Bloomberg story comparing the stock-price "bounces" enjoyed by the companies represented on stage that night in Philadelphia. "We were the only one whose stock went up," he says. "I did an interview about it this morning."

At first glance, Michael Robertson, the 33-year-old CEO of San Diego-based MP3.com, seems like your typical 40 Under 40 kind of guy. He's rich, of course. He's preoccupied with all the usual stuff. He works a lot. He's always trying to make a sale ("It's crazy all the music we've got!"). He strides smilingly among his employees' cubicles. He plays basketball. He hangs out with his kids and his pets. He even frets over his office decor. "Sorry about the ugly chairs," he says apologetically when you walk into the room. "I didn't pick them out." Robertson has some very cool Beatles and Who memorabilia, and he'll proudly show you his new custom-made bookcase.

But scratch beneath the surface and you'll see that Robertson's life falls a bit short of Fernandez's, Doyle's, or even Smith's these days. Robertson isn't looking for a vacation home or a ranch. He's too busy saving his company to have time to relax. Robertson doesn't get summoned to speak in front of political conventions. He gets summoned to squirm in front of judges in New York.

That's one problem with the breathtaking wealth of the Internet moguls: Because it's mostly stock, it has a way of evaporating. Poof! Easy come, easy go. And no story demonstrates this better than Robertson's.

Last summer MP3.com was on top of the world--the quintessential dot-com success story. The site, which offered Web surfers free downloadable music from unsigned artists, went up on a shoestring budget in November 1998. Robertson had his first round of financing--around $11 million--only two months later, and his IPO in July. "We went from our first round of venture capital to going public in six months," he says with pride.

A lot of people thought Robertson's site could transform music delivery and wrest control from the recording industry dinosaurs. In this romantic view, the Internet would free artists to make music the way they really wanted and free consumers to buy in a more flexible, less expensive way. Wall Street smelled revolution and went wild over the company's stock. Within weeks Robertson was worth $903 million, which put him at No. 11 in FORTUNE's ranking last year.

This year he's worth $234 million, less than a third as much, and he's only 64th on FORTUNE's list. How does one lose so much so quickly? How can your stock dive from a high of over $100 to a downright depressing $7 a share? Easily. Explains Robertson: "My stock got pounded because I had five multinational companies sue me." Just as Raul Fernandez got traction for Proxicom by linking arms with the right ally (AOL), Robertson destabilized MP3.com by mixing it up with the wrong enemies. In a precursor to the Napster case of the past summer, five of the world's largest recording companies--Sony, Universal, Warner Music, BMG, and EMI--have sued MP3.com for copyright infringement.

Robertson's company was never accused of abetting online piracy, as Napster has been. The music companies objected to the database built to facilitate the feature called My.MP3.com, which allowed users to get MP3 copies of the CDs they already owned. But that's little consolation to Robertson. After months of wrangling, he had to pay a reported $80 million to the companies to license copies of their music for his database. The old economy wasn't dead after all.

Robertson doesn't complain about his personal lot. He says the money was never really real to him, except that "I realized I don't have to worry about getting speeding tickets anymore. My insurance goes up? Big deal." Robertson owns 38% of MP3, so he won't be poor, no matter what. "It doesn't affect me," he says of MP3's stock plunge. The fate of the company, however, does keep Robertson up at night. "My focus is on making this company a success," he says. That won't be easy. Legal troubles have been a major distraction. He has spent a considerable part of the past year in trials and depositions. "In a year, Mr. Robertson has gone through a lifetime of CEO-ness: lawsuits and depositions and trials," he says, referring to himself in the third person. And it isn't over yet. On Aug. 28, he flew back to New York for more legal proceedings.

And the stock market's verdict on MP3.com does matter in one respect: "Where the stock market drop really hurts me is my 300 employees," Robertson says. "They've got options at 20, 30, 40 bucks. Our metrics are great, but not to see that reflected in the public markets so that it benefits the employees pains me."

Robertson wants to leave no doubt how great he thinks those "metrics" really are. He gets up and down out of his seat, demonstrating MP3.com's technology on this computer or that, flipping through pages in a PowerPoint presentation. He clicks this button on the screen and we hear the Fixx; on that one and we hear techno band Bassic; on another and we hear the Steve Miller Band: "Time keeps on slippin', slippin', slippin'/ Into the future..." As Robertson sees it, what makes MP3.com valuable is something the record companies can't take away or duplicate--the technology the company has created. "If you look at us as an infrastructure company," he says, "we're really undervalued." You can practically taste his pitch on the Street.

But no amount of energy or cool technology will make it easy for Robertson to claw his way back. He still has to settle with the music publishers before My.MP3.com can go live again. And several recording companies, including Sony and Universal, plan to come out with online music subscription services of their own, undercutting another of Robertson's offerings. "While they're suing us, they're doing the exact same thing we are!" Robertson says, despair ever so briefly creeping out from the shadows of the office. "There's vindication in that, but it's kind of frustrating."

FOR THE FULL LIST OF THE 40 UNDER 40, TURN TO THE NEXT STORY.

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