Updated from March 28We 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), whose shares are volatile as a result of perennial speculation, and the even-rarer company turning a profit, like electron-microscope maker FEI ( FEIC), 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) 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.