It's especially critical that technology stocks start to show some life again in 2004. The retail sector is probably headed for its usual postholiday shopping season slump. The financials are going to be facing stiff headwinds all year from a slowdown in the refinancing boom and the fears of higher interest rates in the second half of the year. That pretty much leaves it up to technology stocks to provide the leadership that any sustainable rally needs. Which brings me to the need for next big things in technology. You see, the rally that drove the technology-laden Nasdaq Composite index from its March 11 closing low of 1271.47 to its closing high of 1989.82 on Dec. 1 has pretty much priced business as usual into the technology sector. With year-to-date returns of 68% for Applied Materials ( AMAT), 82% for Cisco Systems ( CSCO), 97% for Intel ( INTC) and 91% for Texas Instruments ( TXN), stock prices have anticipated much of the cyclical recovery off the bottom and a return to revenue growth as usual. For technology stocks to start moving up again, for them to reassert their role as market leaders and for them to put the juice back in this rally, they will have to deliver the unexpected: the next big thing. Here are my five candidates for the tech sector's next big things of 2004.
Personal Manipulation of Digital Content (PMDC)
Today, digital content is mostly preformatted for consumers by content providers. Consumers are able to access the content by using a variety of products -- digital cameras, Apple Computer's ( AAPL) iPod and TiVo ( TIVO), for instance. Increasingly, consumers want to exercise more control over that content, and that's where PMDCs come in. PMDC is divided among hundreds of content and device makers, and none of these individually qualifies as a next big thing. But PMDC requires storage, tons and tons of storage, in new, inexpensive, smaller, easy-to-use devices. PMDC has already transformed the disk-drive industry from a commodity producer of storage for PC makers into cutting-edge technology companies that realize they've got immense new markets open to them if they can make their drives small and cheap enough to fit in a cable TV set-top box, for example.