Chips Hit a Sticking Point

Bill Gorman, vice president of equity research at PNC Advisors, sees a similar scenario. "We're in summer, it's seasonally slow, and there might not be any breaking events that could change some of the caution that's set in over the past several days."

Indeed, the SOX has flattened since July 20, the day after Intel reported results. Since that time, the chip index has been down nominally while broader stock market indices have eked out gains.

Gorman speculates that third-quarter results and fourth-quarter expectations might have to be announced before tech investors have reason to buy again.

Still, others see the uncertainty as evidence that the best is yet to come. "People forget that there's a process at work and it's one of doubters being converted into believers," says Ian Fraley, managing principal with San Francisco-based hedge fund Financia Capital.

He says recent gains show that many people have become fans of all tech stocks, but that the conversion cycle isn't yet complete. "I hear more bullishness on tech right now, but I think it's an 'and/but' bullishness: 'but stocks are pricey,' 'but I don't see a killer app,' 'but stocks can't go much further.' "

And Fraley points to the sharp drop in tech stocks from March to May as evidence of room for investors to fully commit to the sector. "The fact that people are that on edge and that any kind of a selloff gets everyone immediately running for the exits -- that's very bullish."

A bull that's running in place, maybe.

Chip companies are expected to perform well in the second half of the year, but initial third-quarter targets have set-up a speed bump. Stocks have held up so far, but they haven't moved up. That might be good enough for now.

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