High Tech's Hazy Horizon

Part of what is driving the big buys in technology is the money flowing from private-equity firms, armed with cash from pension funds and yield-hungry university endowments. Tech firms also spent more than $70 billion in each of the past three years acquiring other companies, compared with a low of $33 billion in 2002 and a high of nearly $500 billion in 2000, Thomson Financial said.

Technology companies "are flush with cash," said Brendan Gilmartin, an analyst at Thomson. "They're using cash to fund a lot of these acquisitions, unlike the old days when they used the stock price. The metrics have changed . . . they're more capable of executing a more grandiose plan, especially on the expansion front."

Some analysts warn that the caution characteristic of this boom would not insulate investors from a possible fall.

Investors had flocked to tech stocks in recent months because they were seen as largely isolated from the credit market jitters and also on the belief that they would be best positioned to take advantage of global growth in the face of a slowing domestic economy.

Now there are signs that overseas economies are weakening, such as in Europe, and some analysts question the tech sector's growth outlook. There may not be enough advertising dollars for every online company, they said, and corporations may not invest in technology in the way that networking and computer companies are forecasting.

"I don't think there's a whole lot of evidence they're doing that," said Mark Coffelt, chief investment officer of Empiric Funds, which has reduced its investment in tech stocks.

In a sign of how fragile the current tech stock levels might be, some analysts warily eye the weakness in semiconductor companies, even as software, networking and computer hardware makers have hit multiple-year highs. In late-October, for instance, shares of Texas Instruments, the world's biggest maker of mobile-phone chips, was considered a must-buy until the company surprised Wall Street with lower forecasts for the fourth quarter, causing its shares to drop more than 8 percent.

"There's a lot of assumptions in there about growth," Standard & Poor's Silverblatt said, adding that with the economy on shaky footing, it is far from clear just how this boom will play out.

In Silicon Valley, there is an agreement that possible complications, including the subprime mortgage crisis, the Iraq war, and China's safety and quality issues, are out of their control.

"The risks to the valley are all external," Saffo said. "If tech stocks crash, it's not going to be about what's happening here. It's what's happening everywhere else and the general state of the of the world. I see that everything is just pointing in a lot of different crazy directions."

Staff writer Sam Diaz contributed to this report from Washington. Tse reported from New York and Cha reported from Palo Alto, Calif.