When credit conditions stabilized and investors began to hope for a recovery, tech stocks rose on hopes they would share in a return to prosperity.

M&A stirred interest in tech Many tech firms will be among the first stocks to benefit from a better economy, Stepherson says. Companies have learned that tech spending pays off, particularly in boosting the productivity of firms hit by layoffs. "You don't have to pay benefits to your laptop and your server," he says. "Where you had 10 people doing a job, now you might need six."

Other factors have helped tech, experts say. Some merger-and-acquisition activity has attracted interest in the sector, Landesman says. Most notably, Oracle (ORCL) reached a $7.4 billion deal in April to buy Sun Microsystems (JAVA).

Another factor, harder to quantify, is politics. Other stock market sectors are weighed down by worries about new regulations from Washington that could raise costs. Congress and the Obama Administration are considering health-care reform legislation, new financial regulations, and a climate-change bill that could affect the energy and utilities sectors.

"The government regulatory magnifying glass isn't on [the tech] sector," Stepherson says.

Parower notes that the tech sector could be hurt or helped by new regulations on other sectors: For example, tough new rules on financial firms could leave Wall Street with less money to buy tech products. But new disclosure rules from the government could also require technological upgrades so firms can comply, he says.

Investors are divided as to whether tech can continue its run in the second half of 2009.

"A lot of people are saying tech is the place to invest now," says Steven Roge, portfolio manager at R.W. Roge. "But I think we've seen the majority of the outperformance in the sector."

As the economy improves, Roge expects other, more economically sensitive stocks -- such as commodities producers -- to beat out tech stocks.

A key factor for technology stocks will probably be earnings reports. Intel (INTC) reports results on July 14, followed by IBM (IBM) on July 16, Microsoft (MSFT) on July 23, and Cisco Systems (CSCO) on Aug. 5.

Oracle's results on June 23 sent its shares higher after the company's earnings, revenue, and new software bookings all beat analyst predictions.

"Expectations have gotten pretty high," Parower says. "We've been expecting tech to tread water here for a while."

But Landesman argues that tech stocks remain reasonably priced because the sector has a good chance of beating the market's earnings expectations as the economy improves.

Much may depend on whether the U.S. economy improves fast enough to meet investors' heightened expectations for the tech sector.

A service of YellowBrix, Inc.