Updated from 7:00 a.m. EDT

Investors are understandably nervous heading into Intel's ( INTC) second-quarter financial report after the market close Tuesday. The past few weeks have seen a rash of profit warnings from the software side, prompting increasingly bearish analyst calls on the hardware sector.

A backdrop to Intel's highly anticipated earnings report is the debate between those who see Intel as the victim of forces beyond its control, and those who say big-picture worries have been overly hyped.

In the former camp are a handful of chip analysts -- a group now eager to call the downturn in advance after having disastrously stayed bullish in 2000-01. In the past two weeks, analysts at Merrill Lynch and Deutsche Bank downgraded Intel, while Lehman Brothers trimmed third-quarter sales and profit estimates for the chip giant.

In the latter camp, some money managers say Wall Street may have grown too dour, suggesting Intel shares are slipping toward what they view as bargain territory. In that vein, Morgan Stanley upgraded IBM ( IBM) Tuesday, citing a "strong fundamental story and an attractive valuation"; Big Blue shares were recently up 96 cents, or 1.1%, to $85.91.

Intel shares were recently down 8 cents, or 0.3%, to $26.16 and were down 18% year to date heading into Tuesday's session. The stock fell 33 cents, or 1.2%, to $26.24 Monday in the wake of Merrill's downgrade. Intel's decline and Merrill's downgrade followed a series of profit shortfalls across techland, with software outfits PeopleSoft ( PSFT), Siebel Systems ( SEBL) and Veritas ( VRTS) warning of an apparent hiccup in U.S. corporate spending.

Meanwhile, the Fed's June rate hike -- likely the first in a series -- is almost certain to crimp spending by both businesses and consumers. Furthermore, weak same-store sales suggest buying trends have lately been underwhelming, while the weaker-than-expected June employment report raised concerns about jobs growth.

Granted, Intel actually raised its quarterly sales guidance in June, surprising many on Wall Street. Still, the tech bellwether attributed the upside to its sideline business in flash chips, not to the basic microprocessor line, where sales were running only in line with expectations. Analysts already take it on faith that Intel can meet the consensus estimate for June quarter earnings of 27 cents a share on $8.10 billion in revenue.