Multinationals Move on Nanotech

Updated from March 28

We all knew this was going to happen.

Nanotechnology has become the neglected stepchild of the markets. The hype and fervor surrounding it a few years ago gave way to warnings that the science would yield precious few applications -- and profit -- for years.

Then came disappointment and then, in the minds of investors at least, oblivion.

Aside from some erratic stocks, like Altair Nanotechnologies (ALTI Quote), whose shares are volatile as a result of perennial speculation, and the even-rarer company turning a profit, like electron-microscope maker FEI , companies toiling in science on the nanoscale have been quietly treading water.

A nanotech exchange-traded fund representing an index of stocks that was set up by Lux Research, a New York-based firm focusing on nanotechnology, has traded sideways. The PowerShares Lux Nanotech ETF (PXN Quote) was recently trading off 0.8% to $17.27. A year ago, it was trading at $18.03.

And when the Small Times, a publication devoted to the nanotech industry, appraised the state of 2006 venture investing in the new science, it summed it up this way: "Disappointing ... Just add 'extremely' for public market transactions."

The $650 million in venture money invested in nanotech start-ups last year was far below the $1 billion-plus in 2005, and $172 million of that went to three start-ups: NeoPhotonics, Nanosolar and Nanosphere.

So dim is the view that public and private investors have taken of the one-time hotbed of innovation that news reports have appeared suggesting that the U.S. might fall behind other emerging economies, especially China.