Investors perked up after Intel Corp. (Nasdaq: INTC) said it will spend $2 billion to expand its manufacturing capacity. Wall Street should cheer not because Intel's investment means much, but because some investors were looking for an excuse to buy.
And given a market where upside surprises from the likes of Cisco (Nasdaq: CSCO) mean zilch, traders will take what they can get.
Intel: Can it rally the tech sector?
Intel's expansion plans barely qualified as news. The company said it will invest $2 billion to expand manufacturing operations in Rio Rancho, N.M. The expansion will incorporate Intel's new 0.13-micron process technology and manufacture microprocessors on 300 mm (12-inch) wafers. Construction will begin immediately.
Big deal. We knew the company needed to boost capacity. The real news was investors used Intel as an excuse to buy after the Nasdaq bottomed out.
Sure, Intel needs to boost capacity to meet strong demand, but didn't we know that already? Chip sales have been booming and shortages are everywhere. The companies making out the most from the chip boom are equipment makers such as Applied Materials (Nasdaq: AMAT).
Guessing the market is a fool's game, but if investors are looking for buying excuses maybe that indicates a bottom for tech stocks.
Intel said on its first quarter conference call that it grossly underestimated demand and would boost capital spending. The real story is how Intel has misjudged demand for the last year. Intel upped its capital spending target to $6 billion from $5 billion just a little more than a month ago.
In any case, Intel reaffirmed what was common knowledge: Tech demand is strong across nearly all sectors. Dell (Nasdaq: DELL), Hewlett-Packard (NYSE: HWP), Sun Microsystems (Nasdaq: SUNW), Advanced Micro Devices (NYSE: AMD) and many other companies have said the outlook is bright.
Just because the market is skittish doesn't mean business fundamentals have changed.
Maybe Intel's need to "meet the growing future demand" will be enough to bring the bulls back.
eUniverse moves up
If folks are actually getting optimistic about the tech sector, maybe there's a chance they'll even look at a few up-and-coming dot-coms.
Enter eUniverse (Nasdaq: EUNI). When we last checked in with the company it was trying to get listed on the Nasdaq. Mission accomplished. Now eUniverse, which runs commerce and entertainment properties for Generation Y and gamers among others, has been quietly moving up the Media Metrix charts.
EUniverse ranked 17th in April in terms of unique users. The ranking upstaged high-profile competitors such as Snowball.com (Nasdaq: SNOW), which ranked 30th.
Why hasn't anyone noticed? For starters, no one wants to hear about dot-coms these days, especially the consumer-oriented variety. In addition, analysts aren't covering eUniverse.
But that doesn't mean investors shouldn't start poking around. We recently talked to eUniverse Chairman Brad Greenspan, who was upbeat about the company's prospects. Here's the recap: