Dane Hamilton

NEW YORK: Ask an average investor about nanotechnology these days and you're likely to get little more than a blank stare.

But a growing number of Wall Street specialists say the new technology could be a foundation for a new bull market, just as personal computers, biotech and the Internet underpinned previous rallies. Others say the field is way too early for widespread investment and is already being over-hyped.

Nanotechnology, which is computer engineering on a molecular level, is starting to make big waves among venture capitalists looking for the next big money-spinner. Some claim it could dramatically advance high-tech fields like computing, biotech, fiber optics and a dozen others by making processes and materials faster, smaller and stronger.

Analysts say it's too early to tell if "nano" offers real promise, like the PC boom that created Microsoft Corp, Dell Computer Corp., and others, or whether it's just another "dot-com" bust in the making.

"It will have a huge impact on our economy," said Dwayne Mason, a Houston-based attorney with Akin Gump Strauss Hauer & Feld who specializes in nanotech patent issues. "Over the next several years, it will become something everyone is aware of."

Nanotechnology research is now largely confined to government-funded research labs and universities, both in the US and abroad, which typically undertake costly research into basic science. And companies like IBM and Hewlett-Packard are exploring the field.

Increasingly, investors and entrepreneurs are looking to start ventures in a field that the National Science Foundation estimates could grow to exceed $1 trillion in value in ten to fifteen years and employ two million workers.

Still, while the backing of established scientific bodies like NSF is important, not everyone is convinced that the time is ripe for investors to get into the act. Philip Cooper, managing director of Goldman Sachs Asset Management, told a recent conference that he would "run in the other direction" from any investment "with the word 'nano-' appended to it," saying its too early to detect likely winners.

But others are gearing up for a potential new gold rush, comparing it to biotechnology, a 30-year old field that has already produced hundreds of new drugs and billions of dollars in revenue, and has yet to reach its prime.

Tim Draper, founder of influential venture firm Draper Fisher Jurvetson, said nanotechnology will bring "a whole bunch of developments that none of us can ever imagine."

Draper said while investors now scorn Internet stocks after they soared and crashed, Amazon.com's recent move into profitability was proof that the Internet can create value, even though it took longer than expected. That's why investors should give nanotech the benefit of the doubt, he said.

Some big investors seem to agree. Last week, the investment banking unit of J.P. Morgan Chase & Co., one of the biggest players in the industry, announced it has hired Alan Marty, a former nanotech executive at tech-heavyweights Hewlett-Packard and Agilent Technologies, to spearhead nano-investing at J.P. Morgan Partners, its private equity arm with $30 billion under management.

Nanotech will "significantly revolutionize" the fields of semiconductors, life sciences, optical networking and others, predicted Marty. And like start-ups in any new field, "there are sure to be a number of companies that will be unsuccessful," he said.

Marty says his job will be to find those companies that have near-term potential products or processes, a factor that may appeal to investors burned by the Nasdaq dot-com and tech stock bubble of 1999 and 2000.

So far, the hype that grossly inflated genomics, dot-com and other technology companies before the Nasdaq crash two years ago hasn't spread to the small number of publicly traded nanotech companies. But with the ever-present need for money at entrepreneurial start-ups and investment bankers' desire to underwrite a new technology gold rush, that may not last.

Shares in Altair International, for instance, a company that is developing "nanomaterials" for use in fuel cells, paints, solar cells and others, fell 58 percent over the last year to trade at $1.30 on Monday. Similarly, shares in Nanophase Technologies, which is developing applications for its "nanocrystalline" materials, fell 40 percent since mid-2001 to trade at $7.32 on Monday.

Part of the lack of investor interest may be due to the incomprehensible nature of nanotechnology to the average investor. However, as the potential commercial applications of nanotechnology become clearer, that could change, some experts say. Marty said he will be looking at some 50 start-ups in the field, many of which can be expected to conduct initial public offerings in coming years, giving a chance for small investors to get involved.

Others say nanotech may not become a craze similar to dot-coms or genomic stocks, since investors may have learned that companies cannot change in fundamental value overnight,. a factor apparently lost on many investors during the Nasdaq tech boom.

"Clearly there is that hype element, and we may see that in nanotech as well," said Fariba Ghodsian, head of healthcare investing at Roth Capital Partners who expects nanotech to advance biotechnology research. "But as investors become more savvy, hopefully they wont drive the whole thing up or down.