Technology stocks of large companies predicted to gain

Analysts say Intel and other chip stocks will continue to rise.
NEW YORK (AP) -- Long cast in the role of Wall Street's leading sector, technology stocks are fulfilling that expectation again, recording a bigger advance over the past two weeks than other shares.
But tech's own leadership is changing. Though smaller, more speculative stocks were at the forefront of 2003's rally, the leaders in the current market's upswing -- it's far too early to call it a rally from March's correction -- are the stalwart bellwethers.
These large, stable tech firms such as Hewlett-Packard Co., Dell Inc. and Microsoft Corp. weathered well when stocks fell in March and April and, according to market analysts, stand to post the biggest gains in the second half.
"As we get out of this correction, the second leg up of this bull market will be fueled by the larger tech companies," said Ken Tower, chief market strategist for Schwab's CyberTrader.
"The interest in technology is still there, but it's an echo of the enthusiasm of the 1990s. Tech has become more evolutionary than revolutionary, and investors are using a much more considered approach."
What's behind this
With the economy continuing its robust growth, corporations have been setting aside more money for capital expenditures such as technology purchases. That bodes well for tech firms, which stand to see profits grow thanks to corporate spending on new workstations, servers, networks and software.
However, tech's former leaders, such as semiconductors and networking, are still too closely tied to the vagaries of the market. Though they may indeed forecast Wall Street's ups and downs, they won't be the ones to lead an upside swing.
Semiconductors -- the microprocessors at the heart of every piece of computer hardware -- should enjoy the biggest gains coming off their March and April lows.
Worldwide chip sales have had double-digit growth each month since the beginning of 2004, and demand should keep those sales robust.
Those gains are coming, in part, because semiconductors were hit hardest in the recent market correction. And some of those second-half gains could already be priced into stock prices, analysts said.
Since topping off for the year at $32.04 per share Jan. 12, Intel foretold the market's correction through February and March, bottoming out at $26.03 on April 20. Since then, Intel Corp. has risen 9.7 percent, closing Friday at $28.55 per share.
What's predicted
As the market continues to improve, analysts believe Intel and other chip stocks will continue to rise but can still fall victim to the market's volatility.
"Semiconductors have risen to the top just recently because they got so beaten down earlier," said Richard A. Dickson, senior market strategist at Lowry's Research Reports.
Instead of the former leaders, a number of big-name tech stocks that have underperformed -- but kept their fluctuations in check -- could lead future tech gains.
Computer makers and major software companies seem to have avoided much of the turbulence of 2004, signaling that they may show surprising stability and some positive gains.
Dell, for example, has traded between $31 and $37 a share for the past six months but did not fall prey to the March correction as badly as other tech shares did.
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