This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Investing Beyond the Hype Cycle

The cloud is in the process of rolling over in its hype cycle, just as it starts to achieve real results for business. You can see this in the stocks of VMware (VMW), RedHat (RHT) and Rackspace (RAX), all of which have fallen hard in the last few months as hype has turned to a demand for unreasonable returns that were never there in the first place.

Cynics may note that Amazon doesn't seem to have fallen like this. But it has dropped $25/share in price since January, from its high of $283 to its present price of about $258.

But with Amazon, it can be argued the cloud is just one piece of the business, which is a bet on the future of its physical infrastructure -- not just cloud but warehouses and logistics. That story remains intact, and has gone beyond the hype cycle. Thus, a loss of roughly $12 billion in market cap could be just the cloud coming to Earth.


Where the hype cycle really has an impact is on closing the door to new competitors, shutting off their financial oxygen. Piston Cloud, for instance, with its cloud stack you can load from a memory stick, or Nebula, with its $100,000 cloud box, may not get the prominence they might otherwise because they're just late to the party. They will have to prove themselves.

The hype cycle has a purpose. It's designed to attract capital to places that need it. It can deliver spectacular returns to those who know how to ride the wave.

But to ride it you have to time the market, getting out while the getting's good, or you have to be there for the long haul and wait for the cycle to crest before you invest a dime.

At the time of publication, the author was long DDD, RHT and GOOG.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AAPL $130.28 0.00%
FB $81.53 0.00%
GOOG $565.06 0.00%
TSLA $218.42 0.00%
YHOO $44.52 0.00%

Markets

DOW 18,080.14 +21.45 0.12%
S&P 500 2,117.69 +4.76 0.23%
NASDAQ 5,092.0850 +36.0220 0.71%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs