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Pro: Despite Rally, Tech Growth is Slowing Down

Tech is the leader in this rally of late, but could it all just be a mirage?

According to Dan Niles, Co-CIO of Alpha One Capital Partners, it is time to face reality.

“This rally is interesting,” Niles told the Fast traders, “but at the end of the day it still looks like growth is slowing down.”

He also thinks investors will start to rotate out of the smaller tech names into some of the larger ones.

Cisco , which was up in trading Thursday, is the perfect example, he said. When Cisco has problems six months to a year ago, it was looked at as company specific. But now smaller tech firms, like Riverbed Technology and F5 Networks, are talking about similar issues.

“I think what you’ll see is investors starting to normalize across big cap to small cap and go, you know what, maybe we were too harsh on the bigger cap names and the smaller ones we were too optimistic on,” he said.

With Cisco’s analyst meeting set for September, Niles said he’d be inclined to take a long position in CSCO and be short some of the other names that people assumed were untouchable.

Trader Guy Adami agrees that Cisco may be overlooked and under-owned, but he isn’t ready to jump aboard Cisco just yet.

“Cisco has another wave to the downside,” he said, adding that he thinks it will trade down to $14.50.

Niles said that while he has concerns about the market in the second half of the year, he does think Internet names may benefit.

Companies like Google and eBay have already shown accelerating growth, and with the GDP slower in the second half and the European austerity measures kicking in, he thinks a lot of companies will want to take advantage of the internet.

“I’m not sure a slower economy necessarily hurts those vendors,” he said. “In fact, it might help them on the margin as more people go online to buy stuff as well as to sell stuff.”


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Trader disclosure: On July 21, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Adami Owns (AGU); Adami Owns (C); Adami Owns (GS); Adami Owns (INTC); Adami Owns (MSFT); Adami Owns (NUE); Adami Owns (BTU); Finerman's Firm And Finerman Own (AAPL); Finerman's Firm owns (BAC) leaps and Finerman Owns (BAC); Finerman's Firm owns (JPM) leaps and Finerman Owns (JPM); Finerman’s Firm and Finerman own (MSFT); Finerman's Firm Is Short (IWM); Finerman's Firm Is Short (MDY); Finerman's Firm Is Short (SPY); Finerman's Firm Is Long S&P 500 Putsl Finerman's Firm Is Long Russell 2000 Puts; Terranova owns (XOM); Terranova owns (HAS); Terranova owns (DIS); Terranova owns (WFM); Terranova owns (LULU); Terranova owns (MSFT); Terranova owns (TM); Terranova owns (JWN); Terranova owns (MCD); Terranova owns (PEP); Terranova owns (MA); Terranova owns (BX); Terranova owns (GS); Terranova owns (DAR); Terranova owns (CAT); Terranova owns (VRTS); Terranova owns (AAPL); Terranova owns (F); Terranova owns (CVI); Terranova owns (IBM); Terranova owns (FCX)

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