Tech Stocks Still Standing Even After Qualcomm's Wednesday Wallop

The day didn't prove to be a bubble-popping event, despite the implications for growth stocks.
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So much for bellwethers.

You might have reckoned that the market was due for a big selloff after

Qualcomm

(QCOM) - Get Report

, poster stock for tech growth and momentum investing and everything bullish, said Tuesday that business in the current quarter was a little slower than people had thought.

True, it isn't 1996 anymore, when pretty much all of technology sat on top of your desk, and trouble at

Intel

(INTC) - Get Report

meant bad things for the whole sector, and good news at

Seagate

(SEG)

might indicate things were looking up. But shouldn't it matter that Qualcomm, whose stock price has been all about expectations for phenomenally strong growth, sent up a red flag on growth? Shouldn't that worry shareholders of all of the other highflying stocks that have similar growth expectations embedded in their prices?

Apparently not. While Qualcomm shares got hammered Wednesday, dropping 25 points, or 16%, to 124, the rest of the market pretty much yawned. The

Nasdaq

slipped 97 points, but that's just 2%, which is hardly huge in the wake of last week's run of records.

This evening brings yet more bad news from a tech-sector stalwart, with

Dell

(DELL) - Get Report

warning that its fourth-quarter earnings will fall short of expectations. The PC giant also warned of a third-quarter shortfall -- its first earnings miss ever -- after the close

Oct. 18. Yet in the

Oct. 19 trading session, while Dell led the

Philadelphia Stock Exchange Computer Box Maker Index

down 4.4%, the Nasdaq dipped less than a point and the

Dow

rose 0.9%.

And since then, while Dell has choppily gone nowhere, the Nasdaq is up 51.4%. You can say it again: So much for bellwethers.

Growth Opportunity

"Most of the tech stocks, even in the telecom field, are hanging in there," said Dan Mathisson, head stock trader at

D.E. Shaw Securities

, Wednesday. "The real-high-P/E tech stocks are all down, but they're not getting slaughtered. It's not a bubble-popping event or anything like that."

And this makes a kind of sense. Sure, these stocks are, as the getting-tireder-by-the-moment saying puts it, priced for perfection. But they've also been growing like gangbusters, notes

Morgan Stanley Dean Witter

equity strategist Peter Canelo, and that makes a difference.

"We know that for the overall tech sector, growth expectations range in the 30% to 40% area," he says. "We know that in the NDX companies, the really hot ones, the expectations are probably 40% to 50%. And we know that in the Internet, people are expecting 50% to 60% growth. At these growth levels, even 100% overvaluation will be taken care of in six months."

This, he says, is exactly what happened in the first part of last year, when the Nasdaq Composite lay dead in the water while earnings caught up.

It may be that one story gone awry -- even if it really has been

the

story -- just isn't enough to set Wall Street to really worrying over the earnings growth it has put into stocks in the current environment. Tech's rate of growth has just kept on surprising.

Up the Hill Backwards

"We don't know how big it's going to be," said John Manley, equity strategist at

Salomon Smith Barney

. "Whatever we thought it was, whatever story you've made up, it's bigger than that."

And so it looks like the good earnings will keep coming in and those that have stumbled, like some of the old-tech companies in the fourth quarter, will be forgiven. And unless people start seeing signs that growth is really winding down, tech -- even though it may be overvalued, even though it may run into some short-term trouble -- probably won't be such a bad place to be.

"Until you see signs of deceleration, of the Fed going after it, you sort of go with it," says Manley. "It's hard to hurt yourself falling up hill."